What changed in this filing

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Item 1. Financial Statements

2026-05-01 compared with 2025-10-31 · 599 added, 695 removed, 1380 unchanged (48% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

September 30,

(Dollars in thousands)

1 unchanged sentence

$ 48,431 $ 54,755

Interest-earning deposits

Interest-earning deposits and Federal Funds sold

530,873 418,569

3 unchanged sentences

1,125,433 1,102,230

Federal Home Loan Bank stock

21,513 21,513

Mortgage loans held for sale

9 unchanged sentences

73,689 72,656

Core deposit intangible

18,173 20,388

199,008 217,954

$ 6,945,035 $ 6,835,219

LIABILITIES AND SHAREHOLDERS' EQUITY

13 unchanged sentences

89,743 89,657

27,500 30,000

Accrued interest and other liabilities

8 unchanged sentences

40,000,000 shares authorized;

16,253,544 shares issued and outstanding at September 30, 2025 and 16,146,374 shares issued and outstanding at December 31, 2024

17,274,356 shares issued and outstanding at March 31, 2026 and 17,181,096 shares issued and outstanding at December 31, 2025

350,645 349,431

11 unchanged sentences

(Dollars in thousands except per share amounts)

September 30, 2025

September 30, 2024

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

Interest income

2 unchanged sentences

Securities, taxable

5,041 3,140 13,961 8,241

Securities, tax-exempt

1,259 1,056 3,611 3,001

Interest-earning deposits

4,303 3,900 9,374 8,369

Other interest-earning assets

Total interest income

3 unchanged sentences

Short-term borrowings

1,974 2,219 5,656 5,631

Federal Home Loan Bank advances

2,895 3,218 8,689 9,868

Subordinated debt and other borrowings

1,955 2,095 5,831 6,270

Total interest expense

8 unchanged sentences

Service charges on deposit and sweep accounts

2,064 1,753 5,871 4,976

Mortgage banking income

3,066 3,325 9,686 8,690

Credit and debit card income

2,371 2,257 6,922 6,644

Interest rate swap fees

377 389 1,687 2,494

Payroll services income

825 713 2,648 2,295

Earnings on bank owned life insurance

858 449 1,961 2,058

827 781 1,777 3,060

Total noninterest income

10,388 9,667 30,552 30,217

Noninterest expense

1 unchanged sentence

23,679 19,557

2,122 2,146 6,395 6,655

Furniture and equipment depreciation, rent and maintenance

846 938 2,458 2,790

Data processing costs

3,945 3,437 11,315 10,142

Charitable foundation contributions

300 0 306 707

Core conversion costs

Acquisition costs

Core deposit intangible amortization

Other expense

5,837 5,490 16,769 15,247

Total noninterest expense

4 unchanged sentences

$ 22,685 $ 19,537

$ 23,758 $ 19,618 $ 65,913 $ 59,967

Basic earnings per share

10 unchanged sentences

(Dollars in thousands)

September 30, 2025

September 30, 2024

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

$ 22,685 $ 19,537

16 unchanged sentences

Income (Loss)

Balances, July 1, 2025

$ 0 $ 302,294 $ 364,991 $ ( 35,766 ) $ 631,519

Employee stock purchase plan ( 1,071 shares)

Dividend reinvestment plan ( 3,902 shares)

Stock grants to directors for retainer fees ( 197 shares)

Stock-based compensation expense

Cash dividends ($ 0.38 per common share)

( 6,070 ) ( 6,070 )

Net income for the three months ended September 30, 2025

23,758 23,758

Change in net unrealized holding gain (loss) on securities available for sale, net of tax effect

Balances, September 30, 2025

$ 0 $ 303,463 $ 382,679 $ ( 28,512 ) $ 657,630

See accompanying notes to consolidated financial statements.

MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY (Continued)

Comprehensive

Shareholders’

(Dollars in thousands except per share amounts)

Income (Loss)

Balances, January 1, 2026

6 unchanged sentences

( 6,634 ) ( 6,634 )

Net income for the nine months ended September 30, 2025

65,913 65,913

Change in net unrealized holding gain (loss) on securities available for sale, net of tax effect

21,313 21,313

Balances, September 30, 2025

$ 0 $ 303,463 $ 382,679 $ ( 28,512 ) $ 657,630

See accompanying notes to consolidated financial statements.

MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY (Continued)

Comprehensive

Shareholders’

(Dollars in thousands except per share amounts)

Income (Loss)

Balances, July 1, 2024

$ 0 $ 297,591 $ 306,804 $ ( 53,244 ) $ 551,151

Employee stock purchase plan ( 256 shares)

Dividend reinvestment plan ( 4,531 shares)

Stock-based compensation expense

Cash dividends ($ 0.36 per common share)

( 5,700 ) ( 5,700 )

Net income for the three months ended September 30, 2024

Net income for the three months ended March 31, 2026

22,685 22,685

1 unchanged sentence

( 5,202 ) ( 5,202 )

Balances, September 30, 2024

Balances, March 31, 2026

$ 0 $ 350,645 $ 415,499 $ ( 29,197 ) $ 736,947

15 unchanged sentences

( 5,902 ) ( 5,902 )

Net income for the nine months ended September 30, 2024

Net income for the three months ended March 31, 2025

19,537 19,537

Change in net unrealized holding gain (loss) on securities available for sale, net of tax effect

14,372 14,372

Balances, September 30, 2024

Balances, March 31, 2025

$ 0 $ 300,732 $ 348,281 $ ( 40,667 ) $ 608,346

3 unchanged sentences

(Dollars in thousands)

September 30, 2025 September 30, 2024

March 31, 2026 March 31, 2025

Cash flows from operating activities

1 unchanged sentence

Adjustments to reconcile net income to net cash from operating activities

Depreciation and amortization/accretion

Depreciation and amortization

Accretion of acquired loans

Provision for credit losses

( 1,800 ) 2,100

Stock-based compensation expense

6 unchanged sentences

( 3,056 ) ( 2,464 )

Net gain from sales and valuation write-downs of foreclosed assets

Net gain from sale and write-down of former bank premises

Earnings on bank owned life insurance

( 665 ) ( 543 )

Net loss on instruments designated at fair value and related derivatives

Net loss from sales and disposals of premises and equipment

Net loss (gain) on instruments designated at fair value and related derivatives

Net change in:

4 unchanged sentences

( 7,022 ) ( 16,262 )

Net cash from operating activities

Net cash from (for) operating activities

28,309 ( 2,976 )

4 unchanged sentences

( 42,926 ) ( 51,657 )

Purchases of federal reserve stock

Proceeds from maturities, calls and repayments of securities available for sale

48,574 36,542

Proceeds from sales of foreclosed assets

Proceeds from sales of fomer bank premises

Proceeds from bank owned life insurance claims

7 unchanged sentences

(Dollars in thousands)

September 30, 2025 September 30, 2024

March 31, 2026 March 31, 2025

Cash flows from financing activities

Net increase in time deposits

Net increase (decrease) in time deposits

( 33,716 ) 6,796

Net increase in all other deposits

Net increase (decrease) in all other deposits

168,709 ( 23,377 )

1 unchanged sentence

( 12,778 ) 120,581

Payments on term note

Payoffs and paydowns of Federal Home Loan Bank advances

1 unchanged sentence

Proceeds from Federal Home Loan Bank advances

20,000 10,000

Employee stock purchase plan

11 unchanged sentences

Supplemental disclosures of cash flows information

Cash paid during the period for:

Cash paid (received) during the period for:

$ 30,891 $ 32,465

5 unchanged sentences

Basis of Presentation :

The unaudited financial statements for the nine months ended September 30, 2025 include the consolidated results of operations of Mercantile Bank Corporation and its consolidated subsidiaries.

These subsidiaries include Mercantile Community Partners, LLC ("MCP") and Mercantile Bank (“our bank”) and its subsidiaries, including Mercantile Insurance Center, Inc.

The unaudited financial statements for the three months ended March 31, 2026 , include the consolidated results of operations of Mercantile Bank Corporation and its consolidated subsidiaries (unless text clearly suggests otherwise, collectively, "we," "us," "our," "the Company," and "Mercantile").

These subsidiaries include Mercantile Bank and Eastern Michigan Bank (collectively "our banks"), Mercantile Community Partners LLC ("MCP"), and Mercantile Insurance Center, Inc.

("our insurance company"), a subsidiary of Mercantile Bank.

These consolidated financial statements have been prepared in accordance with the instructions for Form 10 -Q and Item 303 (b) of Regulation S-K and do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for a complete presentation of our financial condition and results of operations.

In the opinion of management, the information reflects all adjustments (consisting only of normal recurring adjustments) which are necessary in order to make the financial statements not misleading and for a fair presentation of the results of operations for such periods.

The results for the period ended September 30, 2025 should not be considered as indicative of results for a full year.

The results for the period ended March 31, 2026 , should not be considered as indicative of results for a full year.

For further information, refer to the consolidated financial statements and footnotes included in our annual report on Form 10 -K for the year ended December 31, 2025 .

3 unchanged sentences

Recent Events:

On July 22, 2025, we entered into a definitive merger agreement ("Merger Agreement") with Eastern Michigan Financial Corporation (“EFIN”), pursuant to which EFIN will merge with and into an acquisition subsidiary of Mercantile, with the acquisition subsidiary as the surviving corporation (the “Merger”).

Following the Merger, Mercantile will operate for a period of time as a two -bank holding company.

The newly acquired Eastern Michigan Bank will operate alongside Mercantile’s existing bank, Mercantile Bank, until the first quarter of 2027 at which time Mercantile plans to consolidate Eastern Michigan Bank into Mercantile Bank.

Under the terms of the agreement, each outstanding share of EFIN’s common stock will be converted into the right to receive $ 32.32 in cash and 0.7116 shares of Mercantile common stock, for an aggregate transaction value of approximately $ 90.3 million based upon the closing price of Mercantile's common stock of $ 43.14 on October 16, 2025.

The Merger Agreement has been approved by the boards of directors of each of Mercantile and EFIN.

The parties anticipate that the Merger will close in the fourth quarter of 2025, subject to receiving approval of the Merger Agreement by EFIN’s shareholders and applicable regulatory agencies, and the fulfillment of other customary closing conditions.

Operating Segments:

We conduct our operations through a single business segment, which derives interest and noninterest income through our banking products and services and investment securities.

All of our income relates to our operations in the United States.

Segment assets represent total assets on our Consolidated Balance Sheets and segment net income represents net income on our Consolidated Statements of Income.

On December 31, 2025, Mercantile completed the merger of Eastern Michigan Financial Corporation and its wholly owned banking subsidiary, Eastern Michigan Bank, with approximately $ 572 million in total assets and 11 branch locations.

Mercantile will operate for a period of time as a two -bank holding company.

The newly acquired Eastern Michigan Bank will operate alongside Mercantile Bank until the first quarter of 2027, at which time Mercantile plans to consolidate Eastern Michigan Bank into Mercantile Bank.

See Note 13 - Business Combinations for further information.

Earnings Per Share :

3 unchanged sentences

In the event of a net loss, our unvested restricted shares are excluded from the calculation of both basic and diluted earnings per share.

Approximately 277,000 unvested restricted shares were included in determining both basic and diluted earnings per share for the three and nine months ended September 30, 2025 .

Approximately 311,000 unvested restricted shares were included in determining both basic and diluted earnings per share for the three and nine months ended September 30, 2024 .

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES (Continued)

Approximately 258,000 unvested restricted shares were included in determining both basic and diluted earnings per share for the three months ended March 31, 2026 .

Approximately 278,000 unvested restricted shares were included in determining both basic and diluted earnings per share for the three months ended March 31, 2025 .

Debt Securities :

11 unchanged sentences

Losses are charged against the allowance when the collectability of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

At September 30, 2025 , and December 31, 2024 , there was no allowance related to the available for sale debt securities portfolio.

At March 31, 2026 , and December 31, 2025 , there was no allowance related to the available for sale debt securities portfolio.

Interest income includes amortization of purchase premiums and accretion of discounts.

3 unchanged sentences

Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Federal Home Loan Bank of Indianapolis (“FHLBI”) stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans that we have the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of deferred loan fees and costs.

1 unchanged sentence

Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Net unamortized deferred loan costs amounted to $ 1.7 million and $ 2.2 million at September 30, 2025 , and December 31, 2024 , respectively.

Net unamortized deferred loan costs amounted to $ 1.2 million and $ 1.3 million at March 31, 2026 , and December 31, 2025 , respectively.

The December 31, 2025, acquisition of Eastern Michigan Financial Corporation and its wholly owned banking subsidiary, Eastern Michigan Bank, resulted in the recognition of $ 1.5 million in net purchased loan discounts.

Purchased loan discounts were measured at the time of acquisition based upon the difference between the initial amortized cost basis and the par value of the loan.

The premiums and discounts will be amortized into interest income over the lives of the loans.

Premiums and discounts amortized into interest income totaled $ 0.2 million during the three months ended March 31, 2026 .

Interest income on commercial loans and mortgage loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection.

9 unchanged sentences

Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

As of September 30, 2025 and December 31, 2024 , we determined that the fair value of our mortgage loans held for sale totaled $ 17.7 million and $ 16.0 million, respectively.

As of March 31, 2026 , and December 31, 2025 , we determined that the fair value of our mortgage loans held for sale totaled $ 21.9 million and $ 17.3 million, respectively.

Mortgage loans held for sale are generally sold with servicing rights retained.

Gains and losses on sales of mortgage loans are based on the difference between the selling price, which includes a gain or loss on the interest rate commitment coverage position, and the carrying value of the related loan sold, which is reduced by the cost allocated to the servicing right.

Market rate risk on interest rate commitments with borrowers prior to loan closing is mitigated through forward commitments referred to as to-be-announced mortgage-backed securities.

Market rate risk on interest rate commitments with borrowers prior to loan closings is mitigated through forward commitments referred to as to-be-announced mortgage-backed securities.

These mortgage banking activities are not designated as hedges and are carried at fair value.

The net gain or loss on mortgage banking derivatives, which is generally nominal in dollar amount, is included in the gain on sale of loans and recorded as part of mortgage banking income.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Credit Losses ( “a llowance ” ) :

2 unchanged sentences

Loans are charged-off against the allowance when we believe the uncollectability of a loan balance is confirmed.

The allowance is measured on a collective pool basis when similar risk characteristics exist and on an individual basis when a loan exhibits unique risk characteristic which differentiate the loan from other loans within the loan segments.

The allowance is measured on a collective pool basis when similar risk characteristics exist and on an individual basis when a loan exhibits unique risk characteristics which differentiate the loan from other loans within the loan segments.

Loan segments are further discussed in Note 3 - Loans and Allowance for Credit Losses.

9 unchanged sentences

We are not required to develop and use our own economic forecast model, and we elect to utilize economic forecasts from third -party providers that analyze and develop forecasts of the economy for the entire United States at least quarterly.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES (Continued)

During each reporting period, we also consider the need to adjust the historical loss rates as determined to reflect the extent to which we expect current conditions and reasonable and supportable economic forecasts to differ from the conditions that existed for the period over which the historical loss information was determined.

10 unchanged sentences

o Local or regional conditions that depart from the conditions and forecasts for the entire country

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES (Continued)

The estimation of future credit losses should reflect consideration of all significant factors that affect the collectability of the loan portfolio at each evaluation date.

1 unchanged sentence

Due to the relatively low level of loan losses during the look-back period, we have established a historical loss information factor that has been included in the qualitative factors that are included in the estimation of future credit losses in the periods presented.

We recorded a provision for credit losses of $ 3.9 million and $ 5.9 million during the nine months ended September 30, 2025 and 2024 , respectively.

The provision expense recorded during the first nine months of 2025 primarily reflected a net increase in specific allocations, changes to the economic forecast, and a net increase in qualitative factors stemming from changes in the makeup of the loan portfolio.

The impacts of these factors were partially offset by reductions in the reserve related to faster residential mortgage and consumer loan prepayment speeds and the associated reduced average lives of the portfolios and changes in baseline loss rates.

The provision expense recorded during the first nine months of 2024 primarily reflected a specific allocation for a nonperforming commercial loan relationship, allocations necessitated by net loan growth, a change in the volume and severity of past due loans, nonaccrual loans and adversely classified loans for commercial and industrial loans and a change in the historical loss information qualitative factor for commercial loans, which more than offset the impacts of an improved economic forecast and changes to the loan portfolio composition.

Accrued interest receivable on loans totaling $ 16.7 million and $ 17.3 million as of September 30, 2025 and December 31, 2024 , respectively, is included in other assets on the Consolidated Balance Sheets.

Purchased loans are recorded at fair value at the time of acquisition and distinguished between purchased seasoned loans ("PSL"), purchased credit deteriorated loans ("PCD loans"), and non-seasoned new acquisitions.

PSL are loans purchased at least 90 days after its original origination date and without significant credit deterioration.

PCD loans are acquired loans that have experienced a more-than-insignificant decline in credit quality since their origination.

We considered all loans that were currently 60 days or more past due, ever on nonaccrual status, or that had ever been past due three or more times, consumer loans with borrower credit scores below 600, and commercial loans rated monitor, special mention, substandard or doubtful to be PCD loans.

PSL and PCD loans are accounted for using the gross-up approach prescribed in Accounting Standards Codification 326, Financial Instruments - Credit Losses.

The gross-up approach requires recognition of an allowance for the estimate of credit losses at the acquisition date.

The allowance is recorded with an offsetting gross-up adjustment to the purchase price of the acquired financial asset.

We recorded a provision for credit losses of negative $ 1.8 million and positive $ 2.1 million during the three months ended March 31, 2026 and 2025 , respectively.

The negative provision recorded during the first three months of 2026 primarily reflected improvements to the economic forecast, changes in loan mix, decreases to the residential mortgage loan portfolio, and a decline in specific allocations.

The provision expense recorded during the first three months of 2025 primarily reflected an increased allocation necessitated by changes to the economic forecast and loan growth.

Accrued interest receivable on loans totaling $ 17.3 million and $ 17.5 million as of March 31, 2026 and December 31, 2025 , respectively, is included in other assets on the Consolidated Balance Sheets.

We elected not to measure an allowance for accrued interest receivable and instead elected to reverse interest income on loans that are placed on nonaccrual status, which is generally when loans become 90 days past due, or earlier if we believe the collection of interest is doubtful.

5 unchanged sentences

Specific reserve allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed and collateral deficiencies, among other things.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES (Continued)

For individually analyzed loans which are deemed to be collateral dependent loans, we adopted the practical expedient to measure the allowance based on the fair value of collateral.

10 unchanged sentences

The allowance is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to be funded.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES (Continued)

Mortgage Banking Activities :

Mortgage loans serviced for others totaled $ 1.62 billion and $ 1.55 billion as of September 30, 2025 and December 31, 2024 , respectively.

Mortgage loan servicing rights are recognized as assets based on the allocated value of retained servicing rights on mortgage loans sold and totaled $ 13.1 million and $ 12.5 million as of September 30, 2025 and December 31, 2024 , respectively.

Mortgage loans serviced for others totaled $ 1.70 billion and $ 1.69 billion as of March 31, 2026 and December 31, 2025 , respectively.

Mortgage loan servicing rights, which are recognized as assets based on the allocated value of retained servicing rights on mortgage loans sold, totaled $ 13.6 million as of both March 31, 2026 and December 31, 2025 , respectively.

Mortgage loan servicing rights are carried at the lower of amortized cost or fair value and are expensed in proportion to, and over the period of, estimated net servicing revenues.

1 unchanged sentence

Any impairment of a grouping is reported as a valuation allowance.

The fair value of mortgage servicing rights totaled $ 21.7 million and $ 21.0 million as of September 30, 2025 and December 31, 2024 , respectively.

The fair value of mortgage servicing rights totaled $ 22.0 million and $ 21.4 million as of March 31, 2026 and December 31, 2025 , respectively.

Servicing fee income is recorded for fees earned for servicing mortgage loans.

4 unchanged sentences

The accounting for changes in the fair value of derivatives depends on the use of the derivatives and whether the derivatives qualify for hedge accounting.

Used as part of our asset and liability management to help manage interest rate risk, our derivatives have generally consisted of interest rate swap agreements that qualified for hedge accounting.

Used as part of our asset and liability management strategies to help manage interest rate risk, our derivatives have generally consisted of interest rate swap agreements that qualified for hedge accounting.

We do not use derivatives for trading purposes.

2 unchanged sentences

If hedge accounting does not apply, changes in the fair value of derivatives are recognized immediately in current earnings as interest income or expense.

We had no derivative instruments designated as hedges as of September 30, 2025 , and December 31, 2024 .

We had no derivative instruments designated as hedges as of March 31, 2026 , and December 31, 2025 .

The acquisition method of accounting requires that assets and liabilities acquired in a business combination be recorded at fair value as of the acquisition date.

3 unchanged sentences

Based on our annual impairment analysis of goodwill as of October 1 during the fourth quarter, it was determined that the fair value was in excess of its respective carrying value as of October 1, 2025; therefore, goodwill is considered not impaired.

Subsequent to the analysis of goodwill, on December 31, 2025, we acquired Eastern Michigan Financial Corporation, resulting in the recognition of $ 24.2 million of goodwill.

Goodwill recognized from the acquisition of Eastern Michigan Financial Corporation is further discussed in Note 13 - Business Combinations.

No material changes and no triggering events have occurred that indicated impairment.

MERCANTILE BANK CORPORATION

9 unchanged sentences

Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES (Continued)

The following table depicts our sources of noninterest income presented in the Consolidated Statements of Income that are scoped within Topic 606:

(Dollars in thousands)

September 30, 2025

September 30, 2024

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

Service charges on deposit and sweep accounts

1 unchanged sentence

Credit and debit card income

2,371 2,257 6,922 6,644

Interest rate swap fees

377 389 1,687 2,494

Payroll services income

825 713 2,648 2,295

Customer service fees

298 231 674 611

Service Charges on Deposit and Sweep Accounts:

19 unchanged sentences

Customer Service Fees:

We earn fees by providing a variety of other services to our customers, such as wire transfers, check ordering, sales of cashier checks and money orders, and rentals of safe deposit boxes.

We earn fees by providing a variety of other services to our customers, such as wire transfers, check ordering, sales of cashier checks, and rentals of safe deposit boxes.

Generally, fees are recognized and collected daily, concurrently with the point in time we fulfill the customer request.

6 unchanged sentences

Cost Gains Losses Value

September 30, 2025

March 31, 2026

Treasury notes and bonds

$ 55,652 $ 0 $ ( 346 ) $ 55,306

Government agency debt obligations

8 unchanged sentences

48,937 11 ( 214 ) 48,734

$ 1,162,391 $ 3,694 $ ( 40,652 ) $ 1,125,433

December 31, 2025

Treasury notes and bonds

$ 55,501 $ 0 $ 0 $ 55,501

Government agency debt obligations

8 unchanged sentences

51,127 0 0 51,127

Securities with unrealized losses at September 30, 2025 , aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows:

$ 1,132,603 $ 6,483 $ ( 36,856 ) $ 1,102,230

Securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows:

Less than 12 Months

2 unchanged sentences

Value Loss Value Loss Value Loss

September 30, 2025

March 31, 2026

Treasury notes and bonds

$ 55,306 $ 346 $ 0 $ 0 $ 55,306 $ 346

Government agency debt obligations

8 unchanged sentences

45,748 214 0 0 45,748 214

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SECURITIES (Continued)

Securities with unrealized losses at December 31, 2024 , aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows:

Less than 12 Months

12 Months or More

(Dollars in thousands)

Value Loss Value Loss Value Loss

$ 294,354 $ 2,440 $ 529,178 $ 38,212 $ 823,532 $ 40,652

December 31, 2025

Treasury notes and bonds

$ 0 $ 0 $ 0 $ 0 $ 0 $ 0

Government agency debt obligations

8 unchanged sentences

$ 48,801 $ 270 $ 496,500 $ 36,586 $ 545,301 $ 36,856

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SECURITIES (Continued)

We evaluate securities in an unrealized loss position at least quarterly.

2 unchanged sentences

In analyzing an issuer’s financial condition, we may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition.

At September 30, 2025 , 643 debt securities with estimated fair values totaling $ 537 million had unrealized losses aggregating $ 41.0 million.

At March 31, 2026 , 935 debt securities with estimated fair values totaling $ 824 million had unrealized losses aggregating $ 40.7 million.

At December 31, 2025 , 607 debt securities with estimated fair values totaling $ 545 million had unrealized losses aggregating $ 36.9 million.

At September 30, 2025 , unrealized losses aggregating $ 34.4 million were attributable to bonds issued or guaranteed by agencies of the U.S.

At March 31, 2026 , unrealized losses aggregating $ 33.3 million were attributable to bonds issued or guaranteed by agencies of the U.S.

Federal Government, while unrealized losses totaling $ 7.1 million were associated with bonds issued by state-based municipalities.

3 unchanged sentences

In making this assessment, we consider any changes to the rating of the security by a rating agency and adverse conditions specifically related to the issuer of the security, among other factors.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SECURITIES (Continued)

The amortized cost and fair value of debt securities at September 30, 2025 , by maturity, are shown in the following table.

The amortized cost and fair value of debt securities as of March 31, 2026 , by maturity, are shown in the following table.

The contractual maturity is utilized for U.S.

13 unchanged sentences

Other investments

Total available for sale securities

48,937 48,734

No securities were sold during the first nine months of 2025 or the full-year 2024 .

Securities issued by the State of Michigan and all its political subdivisions had combined amortized costs of $ 229 million and $ 219 million as of September 30, 2025 , and December 31, 2024 , respectively, with estimated market values of $ 224 million and $ 209 million at the respective dates.

We had no securities issued by all other states and their political subdivisions as of September 30, 2025 , and December 31, 2024 .

$ 1,162,391 $ 1,125,433

No securities were sold during the first three months of 2026 or the full-year 2025 .

Securities issued by the State of Michigan and all its political subdivisions had combined amortized costs of $ 257 million and $ 252 million as of March 31, 2026 , and December 31, 2025 , respectively, with estimated market values of $ 251 million and $ 249 million at the respective dates.

Securities issued by all other states and their political subdivisions had combined amortized costs of $ 31.4 million and $ 31.3 million as of March 31, 2026 , and December 31, 2025 , respectively, with estimated market values of $ 31.2 million and $ 31.3 million at the respective dates.

Total securities of any other specific issuer, other than the U.S.

1 unchanged sentence

The carrying value of U.S.

Government agency debt obligation securities that are pledged to secure repurchase agreements was $ 251 million and $ 122 million at September 30, 2025 , and December 31, 2024 , respectively.

Government agency debt obligation securities that are pledged to secure repurchase agreements was $ 220 million and $ 232 million at March 31, 2026 , and December 31, 2025 , respectively.

The carrying value of U.S.

Government agency debt obligation securities that are pledged to secure specific customer deposits was $ 12.5 million and $ 11.7 million at September 30, 2025 , and December 31, 2024 , respectively.

Government agency debt obligation securities that are pledged to secure specific customer deposits was $ 12.5 million and $ 12.6 million at March 31, 2026 , and December 31, 2025 , respectively.

MERCANTILE BANK CORPORATION

5 unchanged sentences

Our allowance for credit loss pools are consistent with those used for loan note disclosure purposes.

Our loan portfolio segments as of both September 30, 2025 and December 31, 2024 were as follows:

Our loan portfolio segments as of both March 31, 2026 , and December 31, 2025 , were as follows:

Commercial Loans

6 unchanged sentences

Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.

Also, declines in real estate values and lack of suitable alternative use for the properties are risks for loans in this category.

Also, declines in real estate values and lack of suitable alternative uses for the properties are risks for loans in this category.

Non-Owner Occupied Commercial Real Estate :

Loans in this category are susceptible to declines in occupancy rates, business failure, and general economic conditions.

Also, declines in real estate values and lack of suitable alternative use for the properties are risks for loans in this category.

Also, declines in real estate values and lack of suitable alternative uses for the properties are risks for loans in this category.

Multi-Family and Residential Rental :

1 unchanged sentence

Loans in this category are susceptible to weakening general economic conditions and increases in unemployment rates, as well as market demand and supply of similar property and the resulting impact on occupancy rates, market rents, cash flow, and income-based real estate values.

Also, the lack of a suitable alternative use for the properties is a risk for loans in this category.

Also, the lack of suitable alternative uses for the properties is a risk for loans in this category.

Vacant Land, Land Development and Residential Construction :

9 unchanged sentences

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Our total loans at September 30, 2025 were $ 4.62 billion compared to $ 4.60 billion at December 31, 2024 , an increase of $ 14.4 million, or 0.3 %.

The components of our loan portfolio disaggregated by class of loan within the loan portfolio segments at September 30, 2025 and December 31, 2024 , and the percentage change in loans from the end of 2024 to the end of the third quarter of 2025 , are as follows:

September 30, 2025

Our total loans at March 31, 2026 , were $ 4.82 billion, a decrease of $ 5.2 million, or 0.1 %, compared to December 31, 2025 .

The components of our loan portfolio disaggregated by class of loan within the loan portfolio segments at March 31, 2026 , and December 31, 2025 , and the percentage change in loans from the end of 2025 to the end of the first quarter of 2026 , are as follows:

March 31, 2026

December 31, 2025

21 unchanged sentences

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

An age analysis of past due loans is as follows as of September 30, 2025 :

Age analyses of past due loans were as follows:

30 – 59 60 – 89 Than 89

1 unchanged sentence

Past Due Past Due Past Due Past Due Current Loans Accruing

March 31, 2026

Commercial and industrial

17 unchanged sentences

$ 1,559 $ 348 $ 3,133 $ 5,040 $ 4,811,653 $ 4,816,693 $ 0

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

An age analysis of past due loans is as follows as of December 31, 2024 :

30 – 59 60 – 89 Than 89

(Dollars in thousands)

Past Due Past Due Past Due Past Due Current Loans Accruing

December 31, 2025

Commercial and industrial

20 unchanged sentences

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Nonaccrual loans as of September 30, 2025 were as follows:

Nonaccrual loans were as follows:

March 31, 2026

December 31, 2025

(Dollars in thousands)

Balance Allowance

With no allowance recorded:

Commercial and industrial

Vacant land, land development and residential construction

Real estate – owner occupied

Real estate – non-owner occupied

Real estate – multi-family and residential rental

Total commercial

1-4 family mortgages

Other consumer loans

Total with no allowance recorded

With an allowance recorded:

Commercial and industrial

$ 164 $ 0 $ 170 $ 0

5 unchanged sentences

1-4 family mortgages

Other consumer loans

Total with an allowance recorded

2,148 0 1,892 0

Total nonaccrual loans:

$ 7,041 $ 6,564

Total nonaccrual loans

$ 9,844 $ 6,837

Nonaccrual loans represent the entire balance of collateral dependent loans.

As of September 30, 2025 and December 31, 2024 , all collateral dependent loans were secured by real estate, with the exception of those classified as commercial and industrial, which were secured by accounts receivable, inventory, and equipment.

Interest income recognized on nonaccrual loans totaled $ 0.5 million during both the nine months ended September 30, 2025 and 2024 , reflecting the collection of interest at the time of principal pay off.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Nonaccrual loans as of December 31, 2024 were as follows:

(Dollars in thousands)

Balance Allowance

With no allowance recorded:

Commercial and industrial

Vacant land, land development and residential construction

Real estate – owner occupied

Real estate – non-owner occupied

Real estate – multi-family and residential rental

Total commercial

1-4 family mortgages

Other consumer loans

2,229 0 1,973 0

Total with no allowance recorded

$ 2,887 $ 0 $ 2,861 $ 0

With an allowance recorded:

4 unchanged sentences

Real estate – non-owner occupied

2,732 2,732 2,732 2,732

Real estate – multi-family and residential rental

Total commercial

3,690 3,665 3,955 3,795

1-4 family mortgages

966 192 1,054 224

Other consumer loans

966 192 1,054 224

Total with an allowance recorded

2 unchanged sentences

$ 4,348 $ 3,665 $ 4,843 $ 3,795

3,195 192 3,027 224

Total nonaccrual loans

$ 7,543 $ 3,857 $ 7,870 $ 4,019

Nonaccrual loans represent the entire balance of collateral dependent loans.

As of March 31, 2026 and December 31, 2025 , all collateral dependent loans were secured by real estate, with the exception of those classified as commercial and industrial, which were secured by accounts receivable, inventory, and equipment.

Interest income recognized on nonaccrual loans totaled $ 0.2 million and $ 0.3 million during the three months ended March 31, 2026 and 2025 , respectively, reflecting the collection of interest at the time of principal pay off.

MERCANTILE BANK CORPORATION

16 unchanged sentences

“Acceptable” Loans with this rating exhibit acceptable sources of repayment and conform with most bank policies and all regulatory requirements.

These are for loans for which repayment risks are satisfactory.

These are loans for which repayment risks are satisfactory.

“Monitor” Loans with this rating are considered to have emerging weaknesses which may include negative current cash flow, high leverage, or operating losses.

2 unchanged sentences

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan at some future date.

“Substandard” Loans with this rate are inadequately protected by current sound net worth, paying capacity of the obligor, or of the pledged collateral, if any.

“Substandard” Loans with this rating are inadequately protected by current sound net worth, paying capacity of the obligor, or of the pledged collateral, if any.

A Substandard loan normally has one or more well-defined weaknesses that jeopardize the repayment of the debt.

8 unchanged sentences

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The following table reflects amortized cost basis of loans as of September 30, 2025 and loan charge-offs during the nine months ended September 30, 2025 based on year of origination:

The following table reflects amortized cost basis of loans as of March 31, 2026 , and loan charge-offs during the three months ended March 31, 2026 , based on year of origination:

(Dollars in thousands)

59 unchanged sentences

$ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 5 $ 5

There were lines of credit with principal balances of $ 1.3 million that were converted to term loans during the first nine months of 2025 .

There were lines of credit with principal balances of $ 5.6 million that were converted to term loans during the first three months of 2026 .

MERCANTILE BANK CORPORATION

1 unchanged sentence

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The following table reflects amortized cost basis of loans as of December 31, 2024 and loan charge-offs during the nine months ended September 30, 2024 based on year of origination:

The following table reflects amortized cost basis of loans as of December 31, 2025 , and loan charge-offs during the three months ended March 31, 2025 , based on year of origination:

(Dollars in thousands)

63 unchanged sentences

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

We use a migration to loss methodology to determine historical loss rates for commercial loans given the comprehensive loan grading process employed by our bank for over two decades, while an open pool approach is best suited for retail loans given the smaller dollar size of the segments.

We use a migration to loss methodology to determine historical loss rates for commercial loans given the comprehensive loan grading process employed by Mercantile for over two decades, while an open pool approach is best suited for retail loans given the smaller dollar size of the segments.

A baseline loss rate is produced at each reporting date for each loan portfolio segment using bank-specific loan charge-off and recovery data over a defined historical look-back period.

The look-back period represents the number of data periods that will be used to calculate a baseline loss rate for each loan portfolio segment.

We determined that the look-back period commencing on January 1, 2011 through the current reporting date was reasonable and appropriate, which was used in the calculation of both the September 30, 2025 , and December 31, 2024 allowance for credit losses.

We determined that the look-back period commencing on January 1, 2011 through the current reporting date was reasonable and appropriate, which was used in the calculation of both the March 31, 2026 , and December 31, 2025 , allowance for credit losses.

Our historical loss rate is then applied to future loan balances at the instrument level based on remaining contractual life adjusted for amortization, prepayment and default to develop a baseline lifetime loss.

Our prepayment speed assumptions are developed at the loan segment level based upon the consideration of all relevant data which we believe could impact anticipated customer behavior, including changes in interest rates, economic conditions, and underlying property valuations.

For the commercial portfolio segments, we assumed a 2.0 % prepayment speed as of both September 30, 2025 and December 31, 2024 as we deemed there to be no considerable changes from historical experience.

For the retail 1 - 4 family mortgage and retail other consumer portfolios, we used a prepayment speed of 9.5 % as of September 30, 2025 and 7.8 % as of December 31, 2024 .

For the commercial portfolio segments, we assumed a 2.0 % prepayment speed as of both March 31, 2026 , and December 31, 2025 , as we deemed there to be no considerable changes from historical experience.

For the retail 1 - 4 family mortgage and retail other consumer portfolios, we used a prepayment speed of 9.5 % as of both March 31, 2026 , and December 31, 2025 .

These qualitative adjustments may increase or decrease our estimate of expected future credit losses.

As of September 30, 2025 and December 31, 2024 , we used a one -year reasonable and supportable economic forecast period, with a six -month straight-line reversion period for all loan segments.

The economic forecasts used for our September 30, 2025 allowance calculation reflected a $ 0.1 million allowance balance reduction.

As of March 31, 2026 , and December 31, 2025 , we used a one -year reasonable and supportable economic forecast period, with a six -month straight-line reversion period for all loan segments.

The economic forecasts used for our March 31, 2026 , allowance calculation reflected a $ 0.9 million allowance balance reduction.

The forecasts used for our December 31, 2025 , allowance calculation reflected a $ 0.3 million allowance balance reduction.

Individual loans exhibiting unique risk characteristics, which differentiated the loans from other loans within the loan segments and were evaluated for expected credit losses on an individual basis, totaled $ 9.8 million and $ 7.4 million as of September 30, 2025 and December 31, 2024 , respectively.

Individual allowance allocations totaled $ 6.8 million and $ 2.2 million as of September 30, 2025 and December 31, 2024 , respectively.

Activity in the allowance for credit losses during the three and nine months ended September 30, 2025 is as follows:

The allowance for PSL and PCD loans acquired from the acquisition of Eastern Michigan Financial Corporation and its wholly owned banking subsidiary, Eastern Michigan Bank, was measured at the loan segment level using proxy expected lifetime loss rates adjusted for qualitative risk factors, including lending management experience, loan review and audit results, asset quality and portfolio trends, loan portfolio growth, industry concentrations, trends in underlying collateral, external factors, and economic conditions not already captured.

Individual loans exhibiting unique risk characteristics, which differentiated the loans from other loans within the loan segments and were evaluated for expected credit losses on an individual basis, totaled $ 6.8 million and $ 7.9 million as of March 31, 2026 , and December 31, 2025 , respectively.

Individual allowance allocations totaled $ 3.9 million and $ 4.0 million as of March 31, 2026 , and December 31, 2025 , respectively.

Activity in the allowance for credit losses during the three months ended March 31, 2026 and 2025 were as follows:

(Dollars in thousands)

7 unchanged sentences

156 36 10 0 4 130 14 0 350

Ending balance

$ 12,338 $ 406 $ 6,922 $ 17,432 $ 5,104 $ 14,520 $ 2,342 $ 65 $ 59,129

Balance at 3-31-2026

$ 12,824 $ 545 $ 7,845 $ 14,661 $ 4,685 $ 13,464 $ 2,689 $ 23 $ 56,736

Provision for credit losses

660 35 ( 753 ) 6,513 1,425 ( 4,327 ) 309 38 3,900

( 87 ) 0 0 0 0 ( 171 ) ( 15 ) 0 ( 273 )

600 4 4 0 12 316 112 0 1,048

Ending balance

$ 12,338 $ 406 $ 6,922 $ 17,432 $ 5,104 $ 14,520 $ 2,342 $ 65 $ 59,129

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Activity in the allowance for credit losses during the three and nine months ended September 30, 2024 is as follows:

(Dollars in thousands)

Commercial and industrial

Commercial vacant land, land development and residential construction

Commercial real estate – owner occupied

Commercial real estate – non-owner occupied

Commercial real estate – multi-family and residential rental

1-4 family mortgages

Other consumer loans

Balance at 12-31-2024

4 unchanged sentences

35 1 2 0 5 47 85 0 175

Ending balance

$ 14,914 $ 354 $ 7,528 $ 10,600 $ 3,224 $ 18,192 $ 1,725 $ 53 $ 56,590

Balance at 3-31-2025

$ 11,798 $ 386 $ 7,679 $ 11,946 $ 3,878 $ 18,874 $ 2,102 $ 3 $ 56,666

Provision for credit losses

7,147 ( 34 ) 181 748 28 ( 923 ) ( 1,300 ) 53 5,900

( 9 ) 0 0 0 0 0 ( 42 ) 0 ( 51 )

335 4 161 0 12 129 186 0 827

Ending balance

$ 14,914 $ 354 $ 7,528 $ 10,600 $ 3,224 $ 18,192 $ 1,725 $ 53 $ 56,590

The following table presents the period-end amortized cost basis of modifications to borrowers experiencing financial difficulty by type of modification made during the three months ended September 30, 2025 :

Interest Rate

(Dollars in thousands)

Term Extension

Commercial and industrial

$ 0 $ 9,590 $ 0

Vacant land, land development and residential construction

Real estate – owner occupied

Real estate – non-owner occupied

Real estate – multi-family and residential rental

Total commercial

$ 0 $ 9,590 $ 0

1-4 family mortgages

Other consumer loans

$ 0 $ 9,590 $ 0

The following table presents the period-end amortized cost basis of modifications to borrowers experiencing financial difficulty by type of modification made during the nine months ended September 30, 2025 :

Interest Rate

(Dollars in thousands)

Term Extension

Commercial and industrial

$ 0 $ 9,596 $ 0

Vacant land, land development and residential construction

Real estate – owner occupied

Real estate – non-owner occupied

Real estate – multi-family and residential rental

Total commercial

$ 0 $ 9,596 $ 0

1-4 family mortgages

Other consumer loans

$ 0 $ 9,596 $ 0

MERCANTILE BANK CORPORATION

1 unchanged sentence

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Interest Rate

(Dollars in thousands)

Term Extension

Commercial and industrial

$ 0 $ 5,670 $ 0

Vacant land, land development and residential construction

Real estate – owner occupied

Real estate – non-owner occupied

Real estate – multi-family and residential rental

Total commercial

$ 0 $ 5,670 $ 0

1-4 family mortgages

Other consumer loans

$ 0 $ 5,670 $ 0

Interest Rate

13 unchanged sentences

Loans listed under Term Extension were generally granted a series of short-term maturity extensions as part of the workout process and associated forbearance agreements.

The following table presents the amortized cost basis of loans that have been modified in the past twelve months to borrowers experiencing financial difficulty by payment status and loan segment as of September 30, 2025 :

There were no modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2025 .

(Dollars in thousands)

15 unchanged sentences

Premises and equipment are comprised of the following:

September 30,

(Dollars in thousands)

9 unchanged sentences

$ 61,861 $ 62,468

Depreciation expense totaled $ 1.3 million and $ 1.5 million during the third quarters of 2025 and 2024 , respectively.

Depreciation expense totaled $ 3.8 million and $ 4.6 million during the first nine months of 2025 and 2024, respectively.

Depreciation expense totaled $ 1.5 million and $ 1.3 million during the first quarters of 2026 and 2025 , respectively.

We enter into facility leases in the normal course of business.

As of September 30, 2025 , we were under lease contracts for eleven of our banking facilities.

The leases have maturity dates ranging from November, 2025 through May, 2048, with a weighted average life of 9.3 years as of September 30, 2025 .

As of March 31, 2026 , we were under lease contracts for eleven of our banking facilities.

The leases have maturity dates ranging from August, 2026 through May, 2048, with a weighted average life of 9.4 years as of March 31, 2026 .

All of our leases have multiple three - to five -year extensions;

2 unchanged sentences

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Right-of-use assets represent our right to use an underlying asset for the lease term, while lease liabilities represent our obligation to make lease payments arising from the lease.

Right-of-use assets represent our right to use underlying assets for the lease terms, while lease liabilities represent our obligation to make lease payments arising from the leases.

Right-of-use assets and lease liabilities are recognized at the lease commencement date at the estimated present value of lease payments over the lease term.

We use our incremental borrowing rate, on a collateralized basis, at lease commencement to calculate the present value of lease payments.

The weighted average discount rate for leases was 6.53 % as of September 30, 2025 .

The right-of-use assets, included in premises and equipment, net on our Consolidated Balance Sheets, and the lease liabilities, included in other liabilities on our Consolidated Balance Sheets, totaled $ 4.0 million and $ 4.4 million as of September 30, 2025 , and December 31, 2024 , respectively.

The weighted average discount rate for leases was 6.52 % as of March 31, 2026 .

The right-of-use assets, included in premises and equipment, net on our Consolidated Balance Sheets, and the lease liabilities, included in other liabilities on our Consolidated Balance Sheets, totaled $ 3.7 million and $ 3.9 million as of March 31, 2026 , and December 31, 2025 , respectively.

As permitted by applicable accounting standards, we have elected not to recognize short-term leases with original terms of twelve months or less on our Consolidated Balance Sheets.

Total operating lease expense associated with the leases aggregated $ 0.3 million during the third quarter of 2025 and $ 0.4 million during the third quarter of 2024 .

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PREMISES AND EQUIPMENT, NET (Continued)

Future lease payments were as follows as of September 30, 2025 :

Total operating lease expense associated with the leases aggregated $ 0.3 million during the first quarters of both 2026 and 2025 .

Future lease payments were as follows as of March 31, 2026 :

(Dollars in thousands)

2 unchanged sentences

Present value of future lease payments (lease liability)

Our total deposits at September 30, 2025 were $ 4.81 billion, an increase of $ 113 million, or 2.4 %, from December 31, 2024 .

The components of our outstanding balances at September 30, 2025 and December 31, 2024 , and percentage change in deposits from the end of 2024 to the end of the third quarter of 2025 , are as follows:

September 30, 2025

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our total deposits at March 31, 2026 , were $ 5.42 billion, an increase of $ 135 million, or 2.6 %, from December 31, 2025 .

The components of our outstanding balances at March 31, 2026 , and December 31, 2025 , and percentage change in deposits from the end of 2025 to the end of the first quarter of 2026 , are as follows:

March 31, 2026

December 31, 2025

14 unchanged sentences

$ 5,419,518 100.0 % $ 5,284,452 100.0 % 2.6 %

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

1 unchanged sentence

Information relating to our repurchase agreements is as follows:

Nine Months Ended

Three Months Ended

Twelve Months Ended

(Dollars in thousands)

September 30, 2025

March 31, 2026

December 31, 2025

14 unchanged sentences

The securities, which are included in securities available for sale on our Consolidated Balance Sheets, are held in safekeeping by a correspondent bank.

FEDERAL HOME LOAN BANK OF INDIANAPOLIS ADVANCES

FHLBI bullet advances totaled $ 320 million at September 30, 2025 , and were scheduled to mature at varying dates from October 2025 through June 2030 , with fixed rates of interest from 0.82 % to 4.50 % and averaging 3.22 %.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OTHER BORROWINGS

FHLBI bullet advances totaled $ 290 million at March 31, 2026 , and were scheduled to mature at varying dates from April 2026 through March 2031 , with fixed rates of interest from 0.93 % to 4.50 % and averaging 3.33 %.

FHLBI bullet advances totaled $ 300 million at December 31, 2025 , and were scheduled to mature at varying dates from January 2026 through June 2030 , with fixed rates of interest from 0.90 % to 4.50 % and averaging 3.27 %.

Maturities of FHLBI bullet advances as of September 30, 2025 were as follows:

Maturities of FHLBI bullet advances as of March 31, 2026 , were as follows:

(Dollars in thousands)

FHLBI amortizing advances totaled $ 26.2 million as of September 30, 2025 , with an average rate of 2.52 % and with final maturities in 2042 .

FHLBI amortizing advances totaled $ 25.3 million as of March 31, 2026 , with an average rate of 2.52 % and with final maturities in 2042 .

FHLBI amortizing advances totaled $ 26.2 million as of December 31, 2025 , with an average rate of 2.52 % and with final maturities in 2042 .

FHLBI amortizing advances are obtained periodically to assist in managing interest rate risk associated with certain longer-term fixed rate commercial loans, with annual principal payments that closely align with the scheduled amortization of the underlying commercial loans.

Scheduled principal payments on FHLBI amortizing advances as of March 31, 2026 , were as follows:

(Dollars in thousands)

Each advance is payable at its maturity date and subject to a prepayment fee if paid prior to the maturity date.

The advances are collateralized by residential mortgage loans, first mortgage liens on multi-family residential property loans, first mortgage liens on commercial real estate property loans, and substantially all other assets of Mercantile Bank under a blanket lien arrangement.

Our borrowing line of credit as of March 31, 2026 , totaled $ 1.16 billion, with remaining availability based on collateral of $ 837 million.

On December 15, 2021, we entered into Subordinated Note Purchase Agreements with certain institutional accredited investors pursuant to which we issued and sold $ 75.0 million in aggregate principal amount of 3.25 % fixed-to-floating rate subordinated notes (“Notes”).

The Notes have a stated maturity of January 30, 2032, and are redeemable by us at our option, in whole or in part, on or after January 30, 2027, on any interest payment date at a redemption price of 100 % of the principal amount of the Notes being redeemed.

The Notes are not subject to redemption at the option of the holder.

The Notes will bear interest at a fixed rate of 3.25 % per year until January 29, 2027.

Commencing on January 30, 2027, and through the stated maturity date of January 30, 2032, the interest rate will reset quarterly at a variable rate equal to the then-current Three-Month Term SOFR plus 212 basis points.

On December 15, 2021, we injected $ 70.0 million of the issuance proceeds into Mercantile Bank as an increase to equity capital.

On January 14, 2022, we issued an additional $ 15.0 million of Notes to certain institutional accredited investors, reflecting an expansion of the $ 75.0 million issuance completed on December 15, 2021.

The additional $ 15.0 million issuance was completed on the same terms as the prior offering and under the existing indenture.

On January 14, 2022, we injected $ 15.0 million of the issuance proceeds into Mercantile Bank as an increase to equity capital.

On December 24, 2025, we entered into a credit agreement with U.S.

Bank National Association for a $ 30.0 million term note.

The term note bears interest at an annual rate equal to 1.70 % plus the greater of (a) zero percent ( 0.0 %) and (b) the one -month forward-looking term rate based on SOFR.

Principal shall be paid in quarterly installments of $ 2.5 million each.

The term note matures on December 24, 2028.

Mercantile is permitted to prepay the term note in full or in part at any time without indemnity, premium or penalty.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEDERAL HOME LOAN BANK OF INDIANAPOLIS ADVANCES (Continued)

Scheduled principal payments on FHLBI amortizing advances as of September 30, 2025 were as follows:

(Dollars in thousands)

Each advance is payable at its maturity date, and is subject to a prepayment fee if paid prior to the maturity date.

Our borrowing line of credit as of September 30, 2025 totaled $ 1.08 billion, with remaining availability based on collateral of $ 725 million.

STOCK-BASED COMPENSATION

3 unchanged sentences

$ 0.8 million during the

nine months ended September 30, 2025 and 2024 , respectively.

three months ended March 31, 2026 and 2025 , respectively.

The Stock Incentive Plan of

2 unchanged sentences

2023 that was approved by shareholders in

Under the Stock Incentive Plan of

Under the Stock Incentive Plans of

2023, incentive awards

5 unchanged sentences

three years and, in the case of performance-based restricted stock issued to executive officers issued under the plan, are subject to the attainment of pre-determined performance goals.

no restricted stock grants during the

nine months ended September 30, 2024 .

A summary of restricted stock activity during the nine months ended September 30, 2025 , is as follows:

A summary of restricted stock activity during the three months ended March 31, 2026 , is as follows:

Nonvested at beginning of the period

4 unchanged sentences

257,996 $ 48.34

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION (Continued)

Of the restricted stock shares granted during the nine months ended September 30, 2025 , 24,910 shares are performance-based awards made to our Named Executive Officers at the target level and are subject to the attainment of pre-determined performance goals.

As of September 30, 2025 , there were approximately 290,000 shares authorized for future incentive awards, and as of December 31, 2024 , there were approximately 383,000 shares authorized for future incentive awards.

Of the restricted stock shares granted during the three months ended March 31, 2026 , 17,422 shares are performance-based awards made to our Named Executive Officers at the target level and are subject to the attainment of pre-determined performance goals.

As of March 31, 2026 , there were approximately 204,000 shares authorized for future incentive awards, and as of December 31, 2025 , there were approximately 293,000 shares authorized for future incentive awards.

We periodically grant shares of common stock to our Corporate and Bank Board Directors for retainer payments with the related expense being recorded over the period of the Directors' service, as summarized below:

4 unchanged sentences

10,007 444 June 1, 2025 - May 31, 2026

321 16 Jan 1, 2026 - May 31, 2026

In March 2025, the Company adopted the 2025 Employee Stock Purchase Plan ("ESPP"), offering a 5 % discount on the market price of the Company's common stock.

5 unchanged sentences

Each offering period spans three months, with the first offering period beginning on July 1, 2025.

As of September 30, 2025 , 200,000 shares were reserved for future issuance under the ESPP.

As of March 31, 2026 , 198,000 shares were reserved for future issuance under the ESPP.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND OFF-BALANCE SHEET RISK

2 unchanged sentences

Loan commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Standby letters of credit are conditional commitments issued by our bank to guarantee the performance of a customer to a third party.

Standby letters of credit are conditional commitments issued by our banks to guarantee the performance of a customer to a third party.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

5 unchanged sentences

We are required to consider expected credit losses associated with loan commitments over the contractual period in which we are exposed to credit risk on the underlying commitments unless the obligation is unconditionally cancellable by us.

Any allowance for off-balance sheet credit exposures is reported as an other liability on our Consolidated Balance Sheet and is increased or decreased via other noninterest expense on our Consolidated Statement of Income.

Any allowance for off-balance sheet credit exposures is reported as an other liability on our Consolidated Balance Sheets and is increased or decreased via other noninterest expense on our Consolidated Statements of Income.

The calculation includes consideration of the likelihood that funding will occur and forecasted credit losses on commitments expected to be funded over their estimated lives.

2 unchanged sentences

For commitments to make loans, we determine an allowance by applying the expected loss allocation factor to the amount expected to be funded.

The calculated allowance aggregated $ 1.1 million and $ 1.0 million as of September 30, 2025 and December 31, 2024 , respectively.

The calculated allowance aggregated $ 2.8 million and $ 2.3 million as of March 31, 2026 , and December 31, 2025 , respectively.

We do not reserve for residential mortgage construction loans, as the loans are for one year or less and draws are governed by the receipt and satisfactory review of contractor and subcontractor sworn statements, lien waivers and title insurance company endorsements.

Letters of credit are rarely drawn.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND OFF-BALANCE SHEET RISK (Continued)

At September 30, 2025 , and December 31, 2024 , the rates on existing off-balance sheet instruments were substantially equivalent to current market rates, considering the underlying credit standing of the counterparties.

A summary of the contractual amounts of our financial instruments with off-balance sheet risk at September 30, 2025 and December 31, 2024 is as follows:

September 30,

At March 31, 2026 , and December 31, 2025 , the rates on existing off-balance sheet instruments were substantially equivalent to current market rates, considering the underlying credit standing of the counterparties.

A summary of the contractual amounts of our financial instruments with off-balance sheet risk at March 31, 2026 , and December 31, 2025 , is as follows:

(Dollars in thousands)

12 unchanged sentences

$ 2,500,453 $ 2,379,305

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DERIVATIVES AND HEDGING ACTIVITIES

7 unchanged sentences

As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the commercial banking customer interest rate swaps and the offsetting interest rate swaps with the correspondent banks are recognized directly to earnings.

Fees paid to us by the correspondent banks are recognized as noninterest income on our Consolidated Statements of Income on the settlement date.

The fair values of derivative instruments as of September 30, 2025 , are reflected in the following table.

Fees paid to us by the correspondent banks are recognized as noninterest income on our Consolidated Statements of Income on the settlement dates.

The fair values of derivative instruments are reflected in the following table.

Balance Sheet

1 unchanged sentence

Notional Amount Location

March 31, 2026

Derivative Assets

4 unchanged sentences

939,497 Other Liabilities

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DERIVATIVES AND HEDGING ACTIVITIES (Continued)

The effect of interest rate swaps that are not designated as hedging instruments resulted in expense of $ 0.2 million during the nine months ended September 30, 2025 that was recorded in other noninterest expense on our Consolidated Statements of Income.

December 31, 2025

Derivative Assets

Interest rate swaps

$ 961,474 Other Assets

Derivative Liabilities

Interest rate swaps

959,447 Other Liabilities

The effect of interest rate swaps that are not designated as hedging instruments resulted in income of less than $ 0.1 million and expense of $ 0.1 million during the three months ended March 31, 2026 and 2025 , respectively, that were recorded in other noninterest expense on our Consolidated Statements of Income.

We have master netting arrangements with our correspondent banks that allow us to net receivables and payables.

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We have elected to not offset these transactions on the Consolidated Balance Sheets.

The netting of derivative instruments as of September 30, 2025 is presented in the following table.

The netting of derivative instruments is presented in the following table.

Gross Amounts Not Offset on the Consolidated Balance Sheet

3 unchanged sentences

Cash Collateral Received or Posted

March 31, 2026

Derivative Assets

4 unchanged sentences

19,163 6,056 2,840 10,267

The fair values of derivative instruments as of December 31, 2024 , are reflected in the following table.

Balance Sheet

(Dollars in thousands)

Notional Amount Location

Derivative Assets

Interest rate swaps

$ 866,157 Other Assets

Derivative Liabilities

Interest rate swaps

864,130 Other Liabilities

The effect of interest rate swaps that are not designated as hedging instruments resulted in expense of $ 0.1 million during the nine months ended September 30, 2024 that was recorded in other noninterest expense on our Consolidated Statements of Income.

The netting of derivative instruments as of December 31, 2024 is presented in the following table.

Gross Amounts Not Offset on the Consolidated Balance Sheet

(Dollars in thousands)

Net Amounts Recognized

Financial Instruments

Cash Collateral Received or Posted

December 31, 2025

Derivative Assets

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FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts, estimated fair values and level within the fair value hierarchy of financial instruments were as follows as of September 30, 2025 and December 31, 2024 :

September 30, 2025

The carrying amounts, estimated fair values and level within the fair value hierarchy of financial instruments were as follows:

March 31, 2026

December 31, 2025

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(2) 22,099 22,099 22,099 22,099

4,556,031 4,622,604 4,546,327 4,558,628

Level 3 4,759,957 4,815,768 4,763,697 4,830,844

Mortgage loans held for sale

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Level 2 89,743 86,911 89,657 86,826

Level 2 27,500 27,500 30,000 30,000

Accrued interest payable

1 unchanged sentence

Interest rate swaps

25,515 25,515 27,050 27,050

Level 2 19,163 19,163 23,532 23,532

See Note 12 for a description of the fair value hierarchy as well as a disclosure of levels for classes of financial assets and liabilities.

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The fair value of other off-balance sheet items is estimated to be nominal.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

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Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We are required to use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach.

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We carry these bonds at historical cost, which we believe approximates fair value, unless our periodic financial analysis or other information that becomes known to us necessitates an impairment.

There was no such impairment as of September 30, 2025 , or December 31, 2024 .

There was no such impairment as of March 31, 2026 , or December 31, 2025 .

We have no Level 1 securities available for sale.

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Insignificant unobservable inputs, such as borrower credit spreads, are also utilized.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUES (Continued)

Mortgage loans held for sale .

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Fair value is based on independent quoted market prices, where applicable, or the prices for other mortgage whole loans with similar characteristics.

As of September 30, 2025 and December 31, 2024 , we determined the fair value of our mortgage loans held for sale to be $ 17.7 million and $ 16.0 million, respectively.

As of March 31, 2026 and December 31, 2025 , we determined the fair value of our mortgage loans held for sale to be $ 21.9 million and $ 17.3 million, respectively.

We do not record loans at fair value on a recurring basis.

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respective unobservable inputs for the approaches consist of adjustments for differences between comparable sales and the utilization of appropriate capitalization rates.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUES (Continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The balances of assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 are as follows:

The balances of assets and liabilities measured at fair value on a recurring basis are as follows:

(Dollars in thousands)

Total (Level 1) (Level 2) (Level 3)

March 31, 2026

Available for sale securities

Treasury notes and bonds

$ 55,306 $ 0 $ 55,306 $ 0

Government agency debt obligations

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Other investments

48,734 0 48,734 0

Interest rate swaps

5 unchanged sentences

$ 19,163 $ 0 $ 19,163 $ 0

There were no sales, purchases or transfers in or out of Level 3 during the nine months ended September 30, 2025 .

The insignificant reduction in Level 3 municipal general obligation bonds during the nine months ended September 30, 2025 reflects the scheduled maturities of such bonds.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUES (Continued)

The balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 are as follows:

(Dollars in thousands)

December 31, 2025

Available for sale securities

Treasury notes and bonds

$ 55,501 $ 0 $ 55,501 $ 0

Government agency debt obligations

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Other investments

51,127 0 51,127 0

Interest rate swaps

5 unchanged sentences

$ 23,532 $ 0 $ 23,532 $ 0

There were no sales, purchases or transfers in or out of Level 3 during 2024 .

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of September 30, 2025 are as follows:

(Dollars in thousands)

Total (Level 1) (Level 2) (Level 3)

Collateral dependent loans

$ 1,529 $ 0 $ 0 $ 1,529

There were no sales, purchases or transfers in or out of Level 3 during the three months ended March 31, 2026 and 2025 .

MERCANTILE BANK CORPORATION

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FAIR VALUES (Continued)

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2024 are as follows:

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of March 31, 2026 , and December 31, 2025 , are as follows:

(Dollars in thousands)

Total (Level 1) (Level 2) (Level 3)

March 31, 2026

Collateral dependent loans

$ 799 $ 0 $ 0 $ 799

December 31, 2025

Collateral dependent loans

$ 991 $ 0 $ 0 $ 991

The carrying values are based on the estimated value of the property or other assets.

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In a vast majority of cases, we assign a 10 % discount factor for estimated selling costs.

BUSINESS COMBINATIONS

On December 31, 2025, Mercantile completed its acquisition of Eastern Michigan Financial Corporation and its wholly owned banking subsidiary, Eastern Michigan Bank, in accordance with the Agreement and Plan of Merger, as amended (the "Merger Agreement") by and between Mercantile, Eastern Michigan Financial Corporation, and Shamrock Merger Sub LLC, a wholly owned special purpose subsidiary of Mercantile (“Merger Sub”), entered into on July 22, 2025.

Pursuant to the Merger Agreement, Eastern Michigan Financial Corporation merged with and into Merger Sub, with Merger Sub continuing as the surviving entity (the “Merger”).

Immediately following the Merger, and also effective as of December 31, 2025, Merger Sub merged with and into Mercantile, with Mercantile continuing as the surviving entity.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BUSINESS COMBINATIONS (continued)

Mercantile accounted for the Eastern Michigan Financial Corporation acquisition as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations ("ASC 805" ).

ASC 805 requires assets purchased and liabilities assumed to be recorded at their respective fair values as of the date of acquisition.

Mercantile determined the fair value of loans, core deposit intangibles, mortgage servicing rights, time deposits, and real property with the assistance of third -party valuations and appraisals.

During the first quarter of 2026, purchase accounting adjustments were made to decrease the core deposit intangible asset by $ 1.3 million, decrease deferred tax liabilities by $ 0.3 million and increase goodwill by $ 1.0 million.

The purchase accounting adjustments were made to the provisional amounts due to the finalization of a third -party valuation report and effective January 1, 2026.

The following table summarizes the final fair value of the total consideration transferred and the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transaction:

(Dollars in thousands, except per share data)

Consideration:

Common stock ( 924,999 shares issued at $ 48.55 per share)

Total consideration

Identifiable assets acquired

Cash and due from banks

Interest-earning deposits

Securities available for sale

Premises and equipment

Core deposit intangible

Total identifiable assets acquired

Identifiable liabilities assumed

Other liabilities

Total identifiable liabilities acquired

Net identifiable assets acquired

The following table presents supplemental pro-forma information as if the acquisition had occurred at the beginning of 2024.

The unaudited pro forma information includes adjustments for interest income on loans acquired, amortization of intangibles arising from the transaction, depreciation expense on property acquired, interest expense on deposits acquired, and the related income tax effects.

The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates.

Three Months Ended March 31,

(Dollars in thousands, except per share data)

Net interest income

$ 55,785 $ 53,611

Provision for credit losses

( 1,800 ) 1,969

Noninterest income

Noninterest expense

41,634 34,168

Income before income taxes

27,639 26,655

Income tax expense

$ 23,117 $ 21,911

Earnings per share

$ 1.34 $ 1.28

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REGULATORY MATTERS

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In addition, further specific types of restrictions may be imposed on the institution at the discretion of the federal regulator.

As of September 30, 2025 and December 31, 2024 , our bank was in the well capitalized category under the regulatory framework for prompt corrective action.

There are no conditions or events since September 30, 2025 , that we believe have changed our bank’s categorization.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REGULATORY MATTERS (Continued)

As of March 31, 2026 , and December 31, 2025 , our banks were in the well capitalized category under the regulatory framework for prompt corrective action.

There are no conditions or events since March 31, 2026 , that we believe have changed our banks' categorizations.

Our actual capital levels and the minimum levels required to be categorized as adequately and well capitalized were:

6 unchanged sentences

(Dollars in thousands)

September 30, 2025

March 31, 2026

Total capital (to risk weighted assets)

$ 835,263 14.9 % $ 449,361 8.0 % $ NA NA%

$ 876,484 14.6 % $ 478,819 8.0 % $ NA

Mercantile Bank

779,125 13.8 450,962 8.0 563,702 10.0

Eastern Michigan Bank

61,537 21.6 22,793 8.0 28,492 10.0

Tier 1 capital (to risk weighted assets)

727,211 12.2 359,115 6.0 NA

Mercantile Bank

721,943 12.8 338,221 6.0 450,962 8.0

Eastern Michigan Bank

59,188 20.8 17,095 6.0 22,793 8.0

Common equity tier 1 (to risk weighted assets)

678,099 11.3 269,336 4.5 NA

Mercantile Bank

721,943 12.8 253,666 4.5 366,406 6.5

Eastern Michigan Bank

59,188 20.8 12,822 4.5 18,520 6.5

Tier 1 capital (to average assets)

727,211 10.7 272,868 4.0 NA

Mercantile Bank

721,943 11.5 251,309 4.0 314,136 5.0

Eastern Michigan Bank

59,188 11.1 21,343 4.0 26,679 5.0

December 31, 2025

Total capital (to risk weighted assets)

$ 777,857 14.2 % $ 439,031 8.0 % $ NA NA%

$ 859,158 14.4 % $ 477,044 8.0 % $ NA

Mercantile Bank

775,664 13.8 449,498 8.0 561,873 10.0

Eastern Michigan Bank

58,893 20.2 23,335 8.0 29,168 10.0

Tier 1 capital (to risk weighted assets)

709,058 11.9 357,783 6.0 NA

Mercantile Bank

717,619 12.8 337,124 6.0 449,498 8.0

Eastern Michigan Bank

56,495 19.4 17,501 6.0 23,335 8.0

Common equity tier 1 (to risk weighted assets)

660,117 11.1 268,337 4.5 NA

Mercantile Bank

717,619 12.8 252,843 4.5 365,217 6.5

Eastern Michigan Bank

56,495 19.4 13,126 4.5 18,960 6.5

Tier 1 capital (to average assets)

709,058 11.4 249,580 4.0 NA

Mercantile Bank

717,619 11.5 248,738 4.0 310,922 5.0

Eastern Michigan Bank

56,495 11.5 19,621 4.0 24,527 5.0

MERCANTILE BANK CORPORATION

1 unchanged sentence

REGULATORY MATTERS (Continued)

Our consolidated capital levels as of September 30, 2025 and December 31, 2024 include $ 48.8 million and $ 48.3 million of trust preferred securities, respectively.

Our consolidated capital levels as of March 31, 2026 , and December 31, 2025 , include $ 49.1 million and $ 48.9 million of trust preferred securities, respectively.

Under applicable Federal Reserve guidelines, the trust preferred securities constitute a restricted core capital element.

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Our ability to include the trust preferred securities in Tier 1 capital in accordance with the guidelines is not affected by the provision of the Dodd-Frank Act generally restricting such treatment, because (i) the trust preferred securities were issued before May 19, 2010, and (ii) our total consolidated assets as of December 31, 2009, were less than $ 15.0 billion.

As of September 30, 2025 and December 31, 2024 , $ 48.8 million and $ 48.3 million of the trust preferred securities, respectively, were included in our consolidated Tier 1 capital.

As of March 31, 2026 , and December 31, 2025 , all $ 49.1 million and $ 48.9 million of the trust preferred securities, respectively, were included in our consolidated Tier 1 capital.

Under the final BASEL III capital rules that became effective on January 1, 2015, there is a requirement for a common equity Tier 1 capital conservation buffer of 2.5 % of risk-weighted assets which is in addition to the other minimum risk-based capital standards in the rule.

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The capital buffer requirement raised the minimum required common equity Tier 1 capital ratio to 7.0 %, the Tier 1 capital ratio to 8.5 % and the total capital ratio to 10.5 % on a fully phased-in basis on January 1, 2019.

We believe that, as of September 30, 2025 , our bank meets all capital adequacy requirements under the BASEL III capital rules on a fully phased-in basis.

Our and our bank’s ability to pay cash and stock dividends is subject to limitations under various laws and regulations and to prudent and sound banking practices.

We believe that, as of March 31, 2026 , our banks meet all capital adequacy requirements under the BASEL III capital rules on a fully phased-in basis.

Our and our banks' ability to pay cash and stock dividends is subject to limitations under various laws and regulations and to prudent and sound banking practices.

On January 15, 2026 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.39 per share that was paid on March 18, 2026 , to shareholders of record as of March 6, 2026 .

On April 17, 2025 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.37 per share that was paid on June 18, 2025 , to shareholders of record as of June 6, 2025 .

On July 17, 2025 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.38 per share that was paid on September 17, 2025 , to shareholders of record as of September 5, 2025 .

As of September 30, 2025 , we had the ability to repurchase up to $ 6.8 million in common stock shares from time to time in open market transactions at prevailing market prices or by other means in accordance with applicable regulations as part of a $ 20.0 million common stock repurchase program announced in May 2021.

No shares were repurchased during the first nine months of 2025 .

Historically, stock repurchases have been funded from cash dividends paid to us from our bank.

Additional repurchases may be made in future periods under the authorized plan or a new plan, which would also likely be funded from cash dividends paid to us from our bank.

As of March 31, 2026 , we had the ability to repurchase up to $ 6.8 million in common stock shares from time to time in open market transactions at prevailing market prices or by other means in accordance with applicable regulations as part of a $ 20.0 million common stock repurchase program announced in May 2021.

No shares were repurchased during the first three months of 2026 .

Historically, stock repurchases have been funded from cash dividends paid to us from Mercantile Bank.

Additional repurchases may be made in future periods under the authorized plan or a new plan, which would also likely be funded from cash dividends paid to us from our banks.

The actual timing, number and value of shares repurchased will be determined by us in our discretion and will depend on a number of factors, including the stock price, capital position, financial performance, general market and economic conditions, alternative uses of capital and applicable legal requirements.

BUSINESS SEGMENT INFORMATION

Pursuant to Financial Accounting Standards Codification 280, Segment Reporting, operating segments represent components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision makers in determining how to allocate resources and assessing performance.

Prior to our acquisition of Eastern Michigan Financial Corporation on December 31, 2025, our chief operating decision makers, which include our Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, evaluated interest and noninterest income streams and credit losses from our various products and services, while expense activities, including interest expense and noninterest expense, were managed, and financial performance was evaluated, on a Company-wide basis.

As a result, detailed profitability information for each interest and noninterest income stream was not used by our chief operating decision makers to allocate resources or in assessing performance.

Rather, our chief operating decision makers used consolidated net income to assess performance by comparing it to and monitoring against budgeted and prior-year results.

This information was used to manage resources to drive business and net income growth, including investment in key strategic priorities, as well as determine our ability to return capital to shareholders.

Subsequent to our acquisition of Eastern Michigan Financial Corporation on December 31, 2025, our chief operating decision makers now evaluate interest and noninterest income streams, credit losses, expense activities, and financial performance through our two wholly owned subsidiary banks, Mercantile Bank and Eastern Michigan Bank.

Each of these operating segments offer similar products and services, but are managed separately due to different pricing, product demand, and consumer markets.

Both segments derive interest and noninterest income through their banking products and services and investment securities.

All of our income relates to our operations in the United States.

Our chief operating decision makers use subsidiary level net income to assess performance by comparing it to and monitoring against budgeted and prior-year results.

This information is used to manage resources to drive business and net income growth, including investment in key strategic priorities, as well as determine our ability to return capital to shareholders.

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BUSINESS SEGMENT INFORMATION (continued)

Selected financial information on our business segments is presented as follows as of and for the three months ended March 31, 2026 :

(Dollars in thousands)

Mercantile Bank

Eastern Michigan Bank

Intercompany Eliminations

Consolidated Total

Interest income

$ 79,474 $ 6,485 $ 1,061 $ ( 1,594 ) $ 85,426

Interest expense

27,456 612 3,021 ( 1,564 ) 29,525

Net interest income

52,018 5,873 ( 1,960 ) ( 30 ) 55,901

Provision for credit losses

( 1,700 ) ( 100 ) - - ( 1,800 )

Net interest income after provision for credit losses

53,718 5,973 ( 1,960 ) ( 30 ) 57,701

Noninterest income

11,073 548 19,567 ( 19,500 ) 11,688

Noninterest expense

36,018 4,048 2,041 - 42,107

Income before federal income tax expense

28,773 2,473 15,566 ( 19,530 ) 27,282

Federal income tax expense

4,949 499 ( 851 ) - 4,597

$ 23,824 $ 1,974 $ 16,417 $ ( 19,530 ) $ 22,685

$ 32,171 $ 24,217 $ 17,301 $ - $ 73,689

Core deposit intangible, net

- 18,173 - - 18,173

6,356,397 567,842 1,026,376 ( 1,005,580 ) 6,945,035

SUBSEQUENT EVENTS

On October 16, 2025 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.38 per share that will be paid on December 17, 2025 , to shareholders of record as of December 5, 2025 .

On April 16, 2026, our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.39 per share that will be paid on June 17, 2026, to shareholders of record as of June 5, 2026.

MERCANTILE BANK CORPORATION

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Forward Looking Statements

This report contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and our company.

Words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “indicates,” “strategy,” “future,” “likely,” “may,” “should,” “will,” and variations of such words and similar expressions are intended to identify such forward-looking statements.

These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Future Factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence.

These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence (“Future Factors”).

Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.

We undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise.

Future Factors include, among others, our ability to successfully combine with Eastern Michigan Financial Corporation;

Future Factors include, among others, our ability to successfully integrate the business of Eastern Michigan Financial Corporation;

our ability to successfully consolidate Eastern Michigan Bank into Mercantile Bank;

our ability to successfully convert our core processing system;

our ability to maintain adequate levels of allowance for credit losses;

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These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement.

The following discussion compares the financial condition of Mercantile Bank Corporation and its consolidated subsidiaries, including Mercantile Community Partners, LLC ("MCP") and Mercantile Bank (“our bank”) and its subsidiaries, including Mercantile Insurance Center, Inc.

at September 30, 2025 and December 31, 2024 and the results of operations for the three and nine months ended September 30, 2025 and 2024.

Reconciliation of U.S.

GAAP to Non-GAAP Financial Measures

This report contains certain non-GAAP financial measures, including adjusted net income, adjusted noninterest expense, and adjusted diluted earnings per share, each of which excludes after-tax costs associated with (i) Mercantile’s acquisition of Eastern Michigan Financial Corporation that was completed during the fourth quarter of 2025 ($0.2 million), and (ii) the previously announced core and digital banking system conversion ($2.3 million).

These non-GAAP financial measures are identified in this report where they appear.

We believe that presenting these non-GAAP financial measures provides investors, analysts, and other interested parties with meaningful supplementary information to assess Mecantile’s underlying operational performance by removing the effect of costs we consider to be non-recurring in nature and not reflective of Mercantile’s core operating results.

These non-GAAP financial measures are used by management to evaluate Mercantile’s ongoing operations, for internal planning and forecasting purposes, and to assess period-over-period comparability.

Management believes it is useful for the reader to review these non-GAAP adjusted measures alongside the GAAP measures.

Our definition of these adjusted financial measures may differ from similarly named measures used by others.

These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for our GAAP measures.

The following discussion compares the financial condition of Mercantile Bank Corporation and its consolidated subsidiaries, including Mercantile Bank, Eastern Michigan Bank (collectively “our banks”), Mercantile Community Partners, LLC ("MCP"), and Mercantile Insurance Center, Inc., a subsidiary of Mercantile Bank, at March 31, 2026, and December 31, 2025, and the results of operations for the three months ended March 31, 2026 and 2025.

This discussion should be read in conjunction with the interim consolidated financial statements and footnotes included in this report.

Unless the text clearly suggests otherwise, references in this report to “us,” “we,” “our” or “the Company” include Mercantile Bank Corporation and its consolidated subsidiaries referred to above.

MERCANTILE BANK CORPORATION

Critical Accounting Policies

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We have reviewed the application of these policies with the Audit Committee of our Board of Directors.

MERCANTILE BANK CORPORATION

Allowance for Credit Losses ( “a llowance ” ) :

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Any impairment of a grouping is reported as a valuation allowance.

Core Deposit Intangible :

In whole bank or bank branch acquisitions, the primary identifiable intangible asset recorded is the value of core deposit intangibles, representing the estimated value of long-term deposit relationships acquired.

The determination involves assumptions and estimates, typically determined through discounted cash flow analysis, considering customer attrition/runoff, alternative funding costs, deposit servicing costs, and discount rates.

Amortization of core deposit intangibles occurs over estimated useful lives reviewed periodically for reasonableness.

These estimated useful lives, typically ranging from seven to 10 years with an accelerated rate of amortization, are periodically reviewed for reasonableness.

Identifiable intangible assets, including core deposit intangibles, are assessed for impairment when events or changes suggest the carrying value may not be recoverable.

Our policy dictates recognition of an impairment loss equal to the difference between the asset’s carrying amount and fair value if the expected undiscounted future cash flows are less than the carrying amount.

Estimating future cash flows involves multiple estimates and assumptions, as previously mentioned.

Accounting rules require us to determine the fair value of all the assets and liabilities of an acquired entity, and to record their fair value on the date of acquisition.

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Financial Overview

We reported net income of $23.8 million, or $1.46 per diluted share, for the third quarter of 2025, compared with net income of $19.6 million, or $1.22 per diluted share, during the third quarter of 2024.

Net income during the first nine months of 2025 totaled $65.9 million, or $4.06 per diluted share, compared to $60.0 million, or $3.72 per diluted share, during the first nine months of 2024.

Growth in net income during both time frames reflected increased net interest income and noninterest income, lower provision expense and reduced federal income tax expense, which more than offset increased overhead costs.

Commercial loans increased $43.0 million during the first nine months of 2025, providing for an annualized growth rate of about 2%.

Commercial and industrial loans grew $50.4 million and multi-family and residential rental property loans increased $45.3 million.

Non-owner occupied commercial real estate (“CRE”) loans declined $37.2 million while owner occupied CRE loans were down $19.4 million;

both CRE loan segments were impacted by the payoffs of several larger relationships largely stemming from sales of the underlying properties and refinancings to the secondary market.

Land development and construction loans expanded by $3.9 million.

As a percent of total commercial loans, commercial and industrial loans and owner occupied CRE loans combined equaled 55.1% as of September 30, 2025, compared to 54.9% as of December 31, 2024.

The commercial loan pipeline remains strong, and as of September 30, 2025, we had $216 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase.

As anticipated, we did experience several relatively large CRE-related loan payoffs, as well as a reduction in line of credit usage, both of which negatively impacted commercial loan growth during the third quarter of 2025.

Residential mortgage loans decreased $46.7 million during the first nine months of 2025, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio.

Residential mortgage loan originations totaled $379 million during the first nine months of 2025, of which about 80% were originated with the intent to sell.

The overall quality of our loan portfolio remains strong, with nonperforming loans equaling 0.21% of total loans as of September 30, 2025.

Accruing loans past due 30 to 89 days remain very low, and we had no foreclosed properties at quarter end.

Gross loan charge-offs totaled $0.3 million during the first nine months of 2025, while recoveries of prior period loan charge-offs aggregated $1.1 million, providing for a net loan recovery of $0.8 million.

We recorded provision expense of $3.9 million during the first nine months of 2025, primarily reflecting a $4.6 million net increase in specific allocations driven by $5.5 million in total allocations for a commercial construction loan relationship that was placed on nonaccrual during the second quarter of 2025, a $1.9 million reserve increase related to changes to the economic forecast, and a $1.7 million net increase in qualitative factors stemming from changes in the makeup of the loan portfolio.

Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $284 million and $206 million during the first nine months of 2025 and 2024, or almost 5% and 4% of average total assets, respectively.

We have generally operated with about 1% to 2% of total assets comprised of interest-earning deposits.

The higher average balance of interest-earning deposits primarily reflects our strategy to reduce the loan-to-deposit ratio via local deposit growth exceeding loan and investment growth, as well as our desire to maintain higher levels of on balance sheet liquidity.

On December 31, 2025, we consummated the acquisition of Eastern Michigan Financial Corporation and its wholly-owned banking subsidiary, Eastern Michigan Bank, headquartered in Crosswell, Michigan.

Eastern Michigan Bank will operate alongside Mercantile Bank until the first quarter of 2027, at which time we plan to consolidate Eastern Michigan Bank into Mercantile Bank in conjunction with the completion of the conversion of our core operating system to a new provider.

The first quarter of 2026 represented the initial period of financial performance that included Eastern Michigan Bank’s operating results.

We reported net income of $22.7 million, or $1.32 per diluted share, for the first quarter of 2026, compared with net income of $19.5 million, or $1.21 per diluted share, during the first quarter of 2025.

Higher net interest income and noninterest income combined with lower provision expense more than offset increased noninterest costs.

Commercial loans increased $16.7 million during the first three months of 2026, providing for an annualized growth rate of about 2%.

As had been the case during most of 2025, commercial loan growth during the first quarter of 2026 was negatively impacted by a higher than typical level of payoffs and line of credit paydowns.

Commercial loan payoffs, largely reflecting business sales, sales of assets and secondary market refinancings, and line of credit paydowns on larger commercial loan relationships totaled $180 million during the first three months of 2026, after aggregating $363 million, or an average of $91 million per quarter, in 2025.

Our typical level of such payoffs and line paydowns average around $50 million per quarter.

As a percentage of total commercial loans, commercial and industrial and owner-occupied commercial real estate (“CRE”) loans equaled 56.6% as of March 31, 2026, compared to 55.0% as of December 31, 2025.

The commercial loan pipeline remains strong, and as of March 31, 2026, we had $240 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase.

Residential mortgage loans decreased $22.6 million during the first three months of 2026, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio during the quarter.

Residential mortgage loan originations totaled $128 million during the first quarter of 2026, reflecting an increase of over 27% compared to the first three months of 2025.

Approximately 83% of the residential mortgage loans originated during the first quarter of 2026 were with the intent to sell, compared to about 80% during the first three months of 2025.

Combined with increased prepayment speeds of our residential mortgage loan portfolio during the past two years, the increased percentage of loans sold has resulted in a declining portfolio balance.

The increased volume of residential mortgage loans originated and percentage of loans sold has had a positive impact on mortgage banking income.

The overall quality of our loan portfolio remains strong, with nonperforming loans totaling $7.5 million, or 0.16% of total loans, as of March 31, 2026.

Accruing loans past due 30 to 89 days remain very low with no foreclosed properties at quarter-end.

Gross loan charge-offs were nominal during the first three months of 2026, while recoveries of prior period loan charge-offs aggregated $0.4 million, providing for a net loan recovery of $0.3 million.

Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $423 million during the first three months of 2026, compared to $267 million during the first three months of 2025.

The higher average balance primarily reflects strong deposit growth during the first quarter of 2026 and our strategy to reduce the loan-to-deposit ratio via local deposit growth exceeding loan and investment growth.

MERCANTILE BANK CORPORATION

Total deposits increased $113 million during the first nine months of 2025.

Aggregate growth in money market deposit accounts totaled $149 million, and interest-bearing checking accounts grew $23.5 million.

Noninterest-bearing checking accounts declined $81.7 million;

however, excluding the expected withdrawal of funds in early January that had been deposited by a single depositor near the end of 2024, these accounts increased by about $10 million.

Securities sold under agreements to repurchase (“sweep accounts”) increased $130 million during the first nine months of 2025, largely reflecting the return of funds that had been withdrawn during the fourth quarter of 2024.

Federal Home Loan Bank of Indianapolis (“FHLBI”) advances declined $40.9 million during the first nine months of 2025.

Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $525 million, or about 10% of total funds, as of September 30, 2025, compared to $537 million, or about 10% of total funds, as of December 31, 2024.

Net interest income increased $3.7 million and $7.3 million during the third quarter and first nine months of 2025, respectively, compared to the same prior-year time periods.

Interest income increased $2.2 million and $8.9 million during third quarter and first nine months of 2025, respectively, compared to the same prior-year time periods, while interest expense declined $1.5 million during the third quarter of 2025 compared to the third quarter of 2024 and increased $1.6 million during the first nine months of 2025 compared to the first nine months of 2024.

Our net interest margin declined 2 basis points and 13 basis points during the third quarter and first nine months of 2025, respectively, compared to the same prior-year time periods.

Our yield on earning assets declined 33 basis points and 30 basis points during the third quarter and first nine months of 2025 during those same respective time periods, while our cost of funds declined 31 basis points and 17 basis points, respectively.

The lower yield on earning assets largely reflected the aggregate 100 basis point reduction in the federal funds rate during the last four months of 2024, along with an additional 25 basis point reduction in mid-September of 2025.

Despite the reductions in the net interest margin, net interest income increased during the 2025 periods primarily due to solid loan growth between the third quarters of 2024 and 2025.

Total loans averaged $4.67 billion and $4.47 billion during the third quarters of 2025 and 2024, respectively, reflecting growth of $201 million, or 4.5%.

Noninterest income totaled $10.4 million and $30.6 million during the third quarter and first nine months of 2025, respectively, compared to $9.7 million and $30.2 million during the third quarter and first nine months of 2024, respectively.

We recorded increased service charges on accounts, primarily reflecting growth in treasury management activity, credit and debit card fees and payroll services income during both time periods.

Mortgage banking income was $0.3 million lower during the third quarter of 2025 compared to the third quarter of 2024, but was $1.0 million higher during the first nine months of 2025 compared to the first nine months of 2024.

The level of mortgage banking income is generally reflective of the volume of loans originated with the intent to sell, but quarter-end fair value calculations associated with residential mortgage loan commitments can also play a notable role as it did during the second and third quarters of 2025.

Interest rate swap income declined during both time periods in 2025 compared to the respective 2024 time frames, generally reflecting a lower volume of new swap transactions.

Noninterest expense totaled $34.8 million and $99.2 million during the third quarter and first nine months of 2025, respectively, compared to $32.3 million and $92.0 million during the third quarter and first nine months of 2024, respectively.

The higher level of noninterest expense during both time periods primarily resulted from increased compensation and benefit costs along with higher data processing expenses.

Expenses associated with the planned acquisition of Eastern Michigan Financial Corporation totaled $0.6 million during the third quarter and first nine months of 2025.

Federal income tax expense totaled $3.7 million and $11.5 million during the third quarter and first nine months of 2025, respectively, compared to $4.9 million and $15.1 million during the third quarter and first nine months of 2024, respectively.

The effective tax rate was 13.4% and 14.9% during the third quarter and first nine months of 2025, respectively, compared to 20.1% during both the third quarter and first nine months of 2024.

The reduction during the 2025 periods compared to the respective 2024 periods primarily reflects the acquisition of transferable energy tax credits during the second and third quarters of 2025, which provided for a $2.6 million reduction in federal income tax expense.

Total deposits increased $135 million during the first three months of 2026.

Aggregate net growth in almost all interest-bearing deposit types more than offset a decline of $50.4 million in out-of-area deposits and reductions in most business transaction deposit products from customers’ customary tax and bonus payments and partnership distributions during the early part of each first quarter.

Securities sold under agreements to repurchase (“sweep accounts”) decreased $12.8 million and Federal Home Loan Bank of Indianapolis (“FHLBI”) advances declined $10.9 million during the first three months of 2026.

Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $395 million, or about 7% of total funds, as of March 31, 2026, compared to $457 million, or approximately 8% of total funds, as of December 31, 2025.

Net interest income grew $7.4 million during the first three months of 2026 compared to the first quarter of 2025, reflecting the combined impact of a $5.1 million increase in interest income and a $2.3 million decrease in interest expense.

Our net interest margin during the first quarter of 2026 was 8 basis points higher than during the first quarter of 2025, with our yield on earning assets declining 31 basis points and our cost of funds decreasing 39 basis points during that time period.

The lower yield on earning assets largely reflected the aggregate 75 basis point reduction in the federal funds rate during the last four months of 2025, with the lower cost of funds being primarily attributed to the decline in the interest rate environment and the onboarding of Eastern Michigan Bank’s relatively low-cost deposit base.

Also contributing to higher net interest income was growth in earning assets.

Average earning assets during the first quarter of 2026 totaled $6.42 billion, compared to $5.70 billion during the first quarter of 2025.

We recorded a negative provision for credit losses of $1.8 million during the first three months of 2026, compared to a positive provision for credit losses of $2.1 million during the first quarter of 2025.

The negative provision expense mainly reflected improvements to the economic forecast, changes in loan mix, a lower residential mortgage loan portfolio balance and a decline in specific allocations.

Noninterest income totaled $11.7 million during the first three months of 2026, compared to $8.7 million during the first quarter of 2025.

We recorded improvements in virtually all noninterest income categories, including solid growth in treasury management fees, mortgage banking income, card income, interest rate swap income and payroll service fees.

We also recorded $0.4 million in interest from the Internal Revenue Service on federal income tax payments made during 2024 that were subsequently refunded due to offsetting purchased energy tax credits.

Noninterest expense totaled $42.1 million during the first quarter of 2026, compared to $31.1 million during the first quarter of 2025.

Excluding one-time costs aggregating $2.9 million related to the core and digital banking system conversion and $0.3 million associated with the acquisition of Eastern Michigan Financial Corporation, noninterest expense increased $7.8 million, or 25.0%, during the first three months of 2026 compared to the respective 2025 period using this non-GAAP measurement.

The increase in noninterest expense mainly resulted from higher salary and benefit costs.

A $1.2 million increase in allocations to the reserve for unfunded loan commitments, largely reflecting a significantly higher level of commercial loan commitments that have been accepted by customers, also contributed to the increase in noninterest expense.

The remaining increase in noninterest expense largely reflects cost inflation and the increased cost of a larger balance sheet and branch network.

Eastern Michigan Bank’s noninterest expense totaled $4.0 million during the first three months of 2026, including salary and benefit costs of $1.7 million, core deposit intangible asset amortization of $0.9 million, and data processing costs of $0.4 million.

Federal income tax expense was $4.6 million during the first three months of 2026, compared to $4.5 million during the first quarter of 2025.

Federal income tax expense rose $0.1 million, while income before federal income tax expense increased $3.2 million.

The acquisition of transferable energy tax credits and the benefits from low-income housing and historic tax credits provided for aggregate tax benefits of $0.8 million and $0.3 million during the first three months of 2026 and 2025, respectively.

The effective tax rate was 16.9% and 18.8% during the first quarter of 2026 and 2025, respectively.

MERCANTILE BANK CORPORATION

Financial Condition

Our total assets increased $256 million during the first nine months of 2025, and totaled $6.31 billion as of September 30, 2025.

Loans grew $14.4 million, securities available for sale increased $125 million and interest-earning deposits were up $82.4 million during the first nine months of 2025.

Deposits increased $113 million and sweep accounts grew $130 million, while FHLBI advances decreased $40.9 million during the first nine months of 2025.

Commercial loans increased $43.0 million during the first nine months of 2025, providing for an annualized growth rate of about 2%.

Commercial and industrial loans grew $50.4 million and multi-family and residential rental property loans increased $45.3 million.

Non-owner occupied CRE loans declined $37.2 million while owner occupied CRE loans were down $19.4 million;

both CRE loan segments were impacted by the payoffs of several larger relationships largely stemming from sales of the underlying properties and refinancings to the secondary market.

Land development and construction loans expanded by $3.9 million.

As a percent of total commercial loans, commercial and industrial loans and owner occupied CRE loans combined equaled 55.1% as of September 30, 2025, compared to 54.9% as of December 31, 2024.

Commercial loans totaled $3.75 billion, or 81.3% of total loans, as of September 30, 2025, compared to $3.71 billion, or 80.6% of total loans, as of December 31, 2024.

As anticipated, we did experience several relatively large CRE-related loan payoffs, as well as a reduction in line of credit usage, which negatively impacted commercial loan growth during the third quarter of 2025.

We had $216 million in unfunded loan commitments on commercial construction and development loans that were in the construction phase as of September 30, 2025, which we expect to be drawn over the next 12 to 18 months.

Our current pipeline reports indicate approximately $307 million in new lending opportunities of which we expect a majority to be accepted and funded over the next 12 to 18 months.

Total assets increased $110 million during the first three months of 2026, totaling $6.95 billion as of March 31, 2026.

Interest-earning deposits increased $111 million and securities available for sale grew $23.2 million, while total loans declined $5.2 million during the first quarter of 2026.

Deposits increased $135 million, while sweep accounts declined $12.8 million and FHLBI advances were down $10.9 million during the first three months of 2026.

Our loan portfolio has historically been primarily comprised of commercial loans.

Commercial loans totaled $3.94 billion, or 81.7% of total loans, as of March 31, 2026.

Commercial loans increased $16.7 million during the first three months of 2026, providing for an annualized growth rate of about 2%.

As had been the case during most of 2025, commercial loan growth during the first quarter of 2026 was negatively impacted by a higher than typical level of payoffs and line of credit paydowns.

Our typical level of such payoffs and line paydowns average around $50 million per quarter.

During the first quarter of 2026, commercial and industrial loans increased $55.3 million, owner-occupied CRE loans were up $20.2 million and land development and construction loans expanded by $2.2 million, while multi-family and residential rental property loans declined $52.0 million and non-owner occupied CRE loans were down $8.9 million.

As a percentage of total commercial loans, commercial and industrial and owner-occupied CRE loans equaled 56.6% as of March 31, 2026, compared to 55.0% as of December 31, 2025.

Availability on commercial construction and development loans that are in the construction phase totaled $240 million as of March 31, 2026, with most of the funds expected to be drawn over the next 12 to 18 months.

Our current pipeline reports indicate continued strong commercial loan funding opportunities in future periods, including $289 million in committed and accepted new lending commitments, a majority of which we expect to be accepted and funded over the next 12 to 18 months.

Our commercial bankers also report additional opportunities they are currently discussing with existing borrowers and potential new customers.

We remain committed to prudent underwriting standards that provide for an appropriate yield and risk relationship, as well as concentration limits, we have established within our commercial loan portfolio.

Usage of existing commercial lines of credit averaged about 45% during the first nine months of 2025, compared to approximately 42% during all of 2024.

Residential mortgage loans totaled $781 million, or 16.9% of total loans, as of September 30, 2025.

Residential mortgage loans decreased $46.7 million during the first nine months of 2025, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio.

Residential mortgage loan originations totaled $379 million during the first nine months of 2025, of which about 80% were originated with the intent to sell.

Other consumer-related loans, primarily comprised of home equity lines of credit, totaled $83.9 million, or 1.9% of total loans, as of September 30, 2025, compared to $65.9 million, or 1.4% of total loans, as of December 31, 2024.

Usage of existing commercial lines of credit averaged about 40% during the first three months of 2026, compared to approximately 44% during all of 2025.

Residential mortgage loans totaled $768 million, or 15.9% of total loans, as of March 31, 2026.

Residential mortgage loan originations totaled $128 million during the first quarter of 2026, reflecting an increase of over 27% compared to the first three months of 2025.

Approximately 83% of the residential mortgage loans originated during the first quarter of 2026 were with the intent to sell, compared to about 80% during the first three months of 2026.

Combined with increased prepayment speeds of our residential mortgage loan portfolio during the past two years, the increased percentage of loans sold has resulted in a declining portfolio balance.

The increased volume of residential mortgage loans originated and percentage of loans sold has had a positive impact on mortgage banking income.

Other consumer-related loans totaled $113 million, or 2.4% of total loans, as of March 31, 2026.

Home equity lines of credit comprised approximately 76% of that total balance.

We expect this loan portfolio segment to remain relatively stable in dollar amount but decline as a percentage of total loans in future periods as the commercial loan segment grows.

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These guidelines include loan review and early identification of problem loans to provide effective loan portfolio administration.

The credit policies and procedures are meant to minimize the risk and uncertainties inherent in lending.

In following these policies and procedures, we must rely on estimates, appraisals and evaluations of loans and the possibility that changes in these could occur quickly because of changing economic conditions or other factors.

The credit policies and procedures are designed to minimize the risk and uncertainties inherent in lending.

In following these policies and procedures, we rely on estimates, appraisals and evaluations of loans and the possibility that changes in these could occur quickly because of changing economic conditions or other factors.

Identified problem loans, which exhibit characteristics (financial or otherwise) that could cause the loans to become nonperforming or require modification in the future, are included on an internal watch list.

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In addition, we may discount certain appraised and internal value estimates to address distressed market conditions.

Nonperforming loans totaled $9.8 million, or 0.2% of total loans, as of September 30, 2025, compared to $5.7 million, or 0.1% of total loans, as of December 31, 2024.

We had no loans past due 90 days or more and accruing interest or foreclosed properties as of September 30, 2025, or December 31, 2024.

The volume of nonperforming loans has remained under 0.3% of total loans since year-end 2015.

Given the low levels of nonperforming loans and accruing loans delinquent 30 to 89 days, combined with what we believe are strong credit administration practices, we are pleased with the overall quality of the loan portfolio.

The overall quality of our loan portfolio remains strong, with nonperforming loans totaling $7.5 million, or 0.2% of total loans, as of March 31, 2026.

The volume of nonperforming loans has remained under 0.3% of total loans since year-end 2015 and has averaged 0.1% over the past seven years.

Accruing loans past due 30 to 89 days remain very low with no foreclosed properties at quarter end.

Given the low levels of nonperforming and delinquent loans, combined with what we believe are strong credit administration practices, we are pleased with the overall quality of the loan portfolio.

We continue our collection efforts on charged-off loans and expect to record recoveries in future periods;

however, given the nature of these efforts, it is not practical to forecast the dollar amount and timing of the recoveries.

The primary risk elements with respect to commercial loans are the financial condition of the borrower, the sufficiency of collateral, and timeliness of scheduled payments.

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MERCANTILE BANK CORPORATION

The allowance equaled $59.1 million, or 1.28% of total loans and 601% of nonperforming loans, as of September 30, 2025.

The allowance was comprised of $52.3 million in general reserves relating to performing loans and $6.8 million in specific reserves on other loans, primarily nonperforming loans, as of September 30, 2025.

Loans with an aggregate carrying value of $0.8 million as of September 30, 2025 had been subject to previous partial charge-offs aggregating $0.5 million over the past several years.

There were no specific reserves allocated to loans that had been subject to a previous partial charge-off as of September 30, 2025.

The allowance equaled $56.7 million, or 1.18% of total loans and 752% of nonperforming loans, as of March 31, 2026.

The allowance was comprised of $52.9 million in general reserves relating to performing loans and $3.8 million in specific reserves on other loans, primarily nonperforming loans, as of March 31, 2026.

Loans with an aggregate carrying value of $3.4 million as of March 31, 2026, had been subject to previous partial charge-offs aggregating $3.1 million over the past several years.

Although we believe the allowance is adequate to absorb loan losses in our loan portfolio as they arise, there can be no assurance that we will not sustain loan losses in any given period that could be substantial in relation to, or greater than, the size of the allowance.

The following table reflects the composition of our allowance for credit losses, nonaccrual loans, and net charge-offs as of and for the nine months ended September 30, 2025.

The following table reflects the composition of our allowance for credit losses, nonaccrual loans, and net charge-offs as of and for the three months ended March 31, 2026.

(Dollars in thousands)

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MERCANTILE BANK CORPORATION

Securities available for sale increased $125 million during the first nine months of 2025, totaling $855 million, or 13.6% of total assets, as of September 30, 2025.

Securities available for sale increased $23.2 million during the first three months of 2026, totaling $1.13 billion as of March 31, 2026.

Purchases of U.S.

Government agency bonds during the first nine months of 2025 aggregated $122 million, while proceeds from maturities and calls totaled $36.0 million.

Government agency bonds during the first three months of 2026 aggregated $38.5 million, while proceeds from maturities totaled $10.0 million.

There were no purchases of U.S.

Government agency guaranteed mortgage-backed securities during the first nine months of 2025, while proceeds from principal paydowns aggregated $3.1 million.

Purchases of municipal bonds totaled $20.8 million during the first nine months of 2025, while maturities totaled $9.5 million.

As of September 30, 2025, the portfolio was primarily comprised of U.S.

Government agency bonds (71%), municipal bonds (26%) and U.S.

Government agency guaranteed mortgage-backed securities (3%).

Government agency guaranteed mortgage-backed securities during the first three months of 2026, while proceeds from principal paydowns aggregated $4.3 million.

Purchases of municipal bonds totaled $4.4 million during the first three months of 2026;

there were no maturities or calls.

As of March 31, 2026, the portfolio was primarily comprised of U.S.

Treasury and U.S.

Government agency bonds (64%), municipal bonds (25%), U.S.

Government agency guaranteed mortgage-backed securities (7%) and domestic bonds (4%).

All of our securities are currently designated as available for sale, and are therefore stated at fair value.

The fair value of securities designated as available for sale as of September 30, 2025 totaled $855 million, including a net unrealized loss of $36.1 million.

The fair value of securities designated as available for sale as of March 31, 2026, totaled $1.13 billion, including a net unrealized loss of $37.0 million.

The net unrealized loss equaled $30.4 million as of December 31, 2025.

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We expect any upcoming purchases to generally consist of U.S.

Government agency bonds and municipal bonds, with the securities portfolio maintained at about 13% to 16% of total assets.

Government agency bonds and municipal bonds, with the securities portfolio maintained at the current level of approximately 16% of total assets.

Market values on our U.S.

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We believe our valuation methodology provides for a reasonable estimation of market value, and that it is consistent with the requirements of accounting guidelines.

FHLBI stock totaled $21.5 million as of September 30, 2025, unchanged from December 31, 2024.

FHLBI stock totaled $22.1 million as of March 31, 2026, unchanged from December 31, 2025.

Our investment in FHLBI stock is necessary to engage in the FHLBI’s advance and other financing programs.

We have regularly received quarterly cash dividends, and we expect a cash dividend will continue to be paid in future quarterly periods.

We have generally operated with about 1% to 2% of total assets comprised of interest-earning deposits.

Net premises and equipment equaled $56.2 million as of September 30, 2025, compared to $53.4 million as of December 31, 2024.

Depreciation expense totaled $3.8 million during the first nine months of 2025, while investments associated with renovations of existing facilities and equipment purchases aggregated $6.6 million.

Net premises and equipment equaled $61.9 million as of March 31, 2026, compared to $62.5 million as of December 31, 2025.

Depreciation expense totaled $1.5 million during the first three months of 2026, while investments associated with renovations of existing facilities and equipment purchases aggregated $0.9 million.

MERCANTILE BANK CORPORATION

Total deposits increased $113 million during the first nine months of 2025.

Aggregate growth in money market deposit accounts totaled $149 million, and interest-bearing checking accounts grew $23.5 million.

Noninterest-bearing checking accounts declined $81.7 million;

however, these accounts increased about $10 million excluding the expected withdrawal of funds in early January that had been deposited by a single depositor near the end of 2024.

Sweep accounts increased $130 million during the first nine months of 2025, largely reflecting the return of funds that had been withdrawn during the fourth quarter of 2024.

FHLBI advances declined $40.9 million during the first nine months of 2025.

Uninsured deposits totaled approximately $2.6 billion, or about 54% of total deposits, as of September 30, 2025, compared to approximately $2.2 billion, or 46% of total deposits, as of December 31, 2024.

The uninsured amounts are estimates based on the methodologies and assumptions we use for bank regulatory reporting requirements.

Sweep accounts increased $130 million during the first nine months of 2025, largely reflecting the return of funds in early 2025 that had been withdrawn during the fourth quarter of 2024.

The aggregate balance of sweep accounts is subject to relatively large daily fluctuations given the nature of the customers utilizing this product and the sizable balances that many of the customers maintain.

The average balance of sweep accounts equaled $239 million during the first nine months of 2025, with a high daily balance of $286 million and a low daily balance of $115 million.

Total deposits increased $135 million during the first three months of 2026, totaling $5.42 billion as of March 31, 2026.

Money market deposit accounts increased by $109 million, interest checking accounts were up $56.9 million, local time deposits grew $16.7 million, and savings deposits increased $10.3 million, while noninterest-bearing checking accounts declined $7.7 million during the first three months of 2026.

The deposit balance increases reflect new deposit account relationships and additional funds from existing deposit customers, largely from business and public units.

Uninsured deposits totaled approximately $2.8 billion, or about 52% of total deposits, as of March 31, 2026, compared to approximately $2.9 billion, or about 54% of total deposits, as of December 31, 2025.

The uninsured amounts are estimates based on the methodologies and assumptions we use for regulatory reporting requirements.

Our level of uninsured deposits, which has remained relatively steady as a percentage of total deposits, is generally higher than banking industry averages given our commercial lending focus.

Sweep accounts decreased $12.8 million during the first quarter of 2026, totaling $220 million as of March 31, 2026.

The aggregate balance of this funding type can be subject to relatively large daily fluctuations given the nature of the customers utilizing this product and the sizable balances that several of the customers maintain.

The average balance of sweep accounts equaled $222 million during the first three months of 2026, with a high daily balance of $243 million and a low daily balance of $211 million.

Our sweep account program entails transferring collected funds from certain business noninterest-bearing checking accounts and savings deposits into overnight interest-bearing repurchase agreements.

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All of our repurchase agreements are accounted for as secured borrowings.

FHLBI advances declined $40.9 million during the first nine months of 2025, totaling $346 million as of September 30, 2025.

New bullet advances totaled $20.0 million, while bullet advance maturities aggregated $60.0 million during the first nine months of 2025.

FHLBI advances declined $10.9 million during the first three months of 2026, totaling $315 million as of March 31, 2026.

Bullet advances aggregating $20.0 million were obtained during the first quarter of 2026, while bullet advance maturities aggregated $30.0 million.

Payments on amortizing FHLBI advances totaled $0.9 million.

Bullet FHLBI advances are generally obtained to provide funds for loan growth and are used to assist in managing interest rate risk, while amortizing FHLBI advances are generally acquired to match-fund specific longer-term fixed rate commercial loans, with the dollar amounts and amortization structures of the underlying advances reflective of the associated commercial loans.

FHLBI advances are collateralized by residential mortgage loans, first mortgage liens on multi-family residential property loans, first mortgage liens on commercial real estate property loans, and substantially all other assets of our bank, under a blanket lien arrangement.

Our borrowing line of credit totaled $1.08 billion, with remaining availability based on collateral equaling $725 million, as of September 30, 2025.

Shareholders’ equity increased $73.1 million during the first nine months of 2025, equaling $658 million as of September 30, 2025.

Positively impacting shareholders’ equity during the first nine months of 2025 was net income of $65.9 million, which was partially offset by the payment of cash dividends totaling $17.9 million.

Bullet FHLBI advances are generally obtained to provide funds for loan growth and are used to assist in managing interest rate risk, while amortizing FHLBI advances are generally acquired to match-fund specific longer-term fixed rate commercial loans, with the dollar amount and amortization structure of the underlying advances reflective of the associated commercial loans.

Our borrowing line of credit totaled $1.16 billion, with remaining availability based on collateral equaling $837 million, as of March 31, 2026.

Shareholders’ equity increased $12.1 million during the first three months of 2026, equaling $737 million as of March 31, 2026.

Positively impacting shareholders’ equity during the first three months of 2026 was net income of $22.7 million, which was partially offset by the payment of cash dividends totaling $6.6 million.

Activity relating to the issuance and sale of common stock through various stock-based compensation programs and our dividend reinvestment plan positively impacted shareholders’ equity by $1.2 million.

A $21.3 million after-tax increase in the market value of our available for sale securities portfolio, reflecting a decline in market interest rates, also positively impacted shareholders’ equity during the first nine months of 2025.

A $5.2 million after-tax decrease in the market value of our available for sale securities portfolio, generally reflecting an increase in market interest rates, negatively impacted shareholders’ equity during the first three months of 2026.

MERCANTILE BANK CORPORATION

Liquidity is measured by our ability to raise funds through deposits, borrowed funds, and capital, or cash flow from the repayment of loans and securities.

These funds are used to fund loans, meet deposit withdrawals, and operate our company.

These funds are used to fund loans, meet deposit withdrawals, and operate the Company.

Liquidity is primarily achieved through local and out-of-area deposits and liquid assets such as securities available for sale, matured and called securities, federal funds sold and interest-earning deposits.

Asset and liability management is the process of managing our balance sheet to achieve a mix of earning assets and liabilities that maximizes profitability, while providing adequate liquidity.

Asset and liability management is the process of managing our balance sheet to achieve a mix of earning assets and liabilities that maximize profitability, while providing adequate liquidity.

To assist in providing needed funds and managing interest rate risk, we periodically obtain monies from wholesale funding sources.

Sweep accounts increased $130 million during the first nine months of 2025, largely reflecting the return of funds in early 2025 that had been withdrawn during the fourth quarter of 2024.

The average balance of sweep accounts equaled $239 million during the first nine months of 2025, with a high daily balance of $286 million and a low daily balance of $115 million.

Sweep accounts decreased $12.8 million during the first quarter of 2026, totaling $220 million as of March 31, 2026.

The average balance of sweep accounts equaled $222 million during the first three months of 2026, with a high daily balance of $243 million and a low daily balance of $211 million.

Our sweep account program entails transferring collected funds from certain business noninterest-bearing checking accounts and savings deposits into overnight interest-bearing repurchase agreements.

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All of our repurchase agreements are accounted for as secured borrowings.

Information regarding our repurchase agreements as of September 30, 2025 and during the first nine months of 2025 is as follows:

Information regarding our repurchase agreements as of March 31, 2026, and during the first three months of 2026 is as follows:

(Dollars in thousands)

Outstanding balance at September 30, 2025

Weighted average interest rate at September 30, 2025

Maximum daily balance nine months ended September 30, 2025

Average daily balance for nine months ended September 30, 2025

Weighted average interest rate for nine months ended September 30, 2025

FHLBI advances declined $40.9 million during the first nine months of 2025, totaling $346 million as of September 30, 2025.

New bullet advances totaled $20.0 million, while bullet advance maturities aggregated $60.0 million during the first nine months of 2025.

Outstanding balance at March 31, 2026

Weighted average interest rate at March 31, 2026

Maximum daily balance three months ended March 31, 2026

Average daily balance for three months ended March 31, 2026

Weighted average interest rate for three months ended March 31, 2026

FHLBI advances declined $10.9 million during the first three months of 2026, totaling $315 million as of March 31, 2026.

Bullet advances aggregating $20.0 million were obtained during the first quarter of 2026, while bullet advance maturities aggregated $30.0 million.

Payments on amortizing FHLBI advances totaled $0.9 million.

Our borrowing line of credit totaled $1.08 billion, with remaining availability based on collateral equaling $725 million, as of September 30, 2025.

We also have the ability to borrow up to an aggregate $70.0 million on a daily basis through correspondent banks using established unsecured federal funds purchased lines of credit.

Draws on these lines of credit during the first nine months of 2025 averaged less than $0.1 million.

In contrast, our interest-earning deposit balance with the Federal Reserve Bank of Chicago averaged $260 million during the first nine months of 2025.

Bullet FHLBI advances are generally obtained to provide funds for loan growth and are used to assist in managing interest rate risk, while amortizing FHLBI advances are generally acquired to match-fund specific longer-term fixed rate commercial loans, with the dollar amount and amortization structure of the underlying advances reflective of the associated commercial loans.

Our borrowing line of credit totaled $1.16 billion, with remaining availability based on collateral equaling $837 million, as of March 31, 2026.

We also have the ability to borrow up to $50.0 million on a daily basis through a correspondent bank using an unsecured federal funds purchased line of credit.

We did not access this line of credit during the first three months of 2026.

In contrast, our interest-earning deposit balance with the Federal Reserve Bank of Chicago averaged $400 million during the first three months of 2026.

We also have a line of credit through the Discount Window of the Federal Reserve Bank of Chicago.

Using certain municipal bonds as collateral, we could have borrowed up to $156 million as of September 30, 2025.

We did not utilize this line of credit during the first nine months of 2025 or at any time during the previous 16 fiscal years, and do not plan to access this line of credit in future periods.

Using certain municipal bonds as collateral, we could have borrowed up to $153 million as of March 31, 2026.

We did not utilize this line of credit during the first three months of 2026 or at any time during the previous 17 fiscal years, and do not plan to access this line of credit in future periods.

MERCANTILE BANK CORPORATION

The following table reflects, as of September 30, 2025, significant fixed and determinable contractual obligations to third parties by payment date, excluding accrued interest:

The following table reflects, as of March 31, 2026, significant fixed and determinable contractual obligations to third parties by payment date, excluding accrued interest:

(Dollars in thousands)

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Premises and equipment leases

The balance of certificates of deposit exceeding the FDIC insured limit and their maturity profile as of September 30, 2025 and December 31, 2024 were as follows:

The balance of certificates of deposit exceeding the FDIC insured limit and their maturity profile as of March 31, 2026, and December 31, 2025, were as follows:

(Dollars in thousands)

September 30, 2025

March 31, 2026

December 31, 2025

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In addition to normal loan funding and deposit flow, we must maintain liquidity to meet the demands of certain unfunded loan commitments and standby letters of credit.

As of September 30, 2025, we had a total of $2.19 billion in unfunded loan commitments and $26.3 million in unfunded standby letters of credit.

As of March 31, 2026, we had a total of $2.47 billion in unfunded loan commitments and $30.9 million in unfunded standby letters of credit.

Of the total unfunded loan commitments, $2.18 billion were commitments available as lines of credit to be drawn at any time as customers’ cash needs vary, and $289 million were for loan commitments generally expected to close and become funded within the next 12 to 18 months.

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Capital Resources

Shareholders’ equity increased $73.1 million during the first nine months of 2025, equaling $658 million as of September 30, 2025.

Positively impacting shareholders’ equity during the first nine months of 2025 was net income of $65.9 million, which was partially offset by the payment of cash dividends totaling $17.9 million.

Shareholders’ equity increased $12.1 million during the first three months of 2026, equaling $737 million as of March 31, 2026.

Positively impacting shareholders’ equity during the first three months of 2026 was net income of $22.7 million, which was partially offset by the payment of cash dividends totaling $6.6 million.

We and our bank are subject to regulatory capital requirements administered by state and federal banking agencies.

We and our banks are subject to regulatory capital requirements administered by state and federal banking agencies.

Failure to meet the various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

As of September 30, 2025, our bank’s total risk-based capital ratio was 14.3%, compared to 13.9% as of December 31, 2024.

Our bank’s total regulatory capital increased $33.4 million during the first nine months of 2025, in large part reflecting net income totaling $74.1 million, which was partially offset by cash dividends paid to us aggregating $45.5 million.

As of September 30, 2025, our bank’s total regulatory capital equaled $793 million, or $236 million in excess of the 10.0% minimum that is among the requirements to be categorized as “well capitalized.” Our and our bank’s capital ratios as of September 30, 2025 and December 31, 2024 are disclosed in Note 13 of the Notes to Consolidated Financial Statements.

Mercantile Bank’s total risk-based capital ratio was 13.8% as of both March 31, 2026, and December 31, 2025.

Mercantile Bank’s total regulatory capital increased $3.5 million during the first three months of 2026, in large part reflecting net income totaling $23.8 million, which was partially offset by cash dividends paid to us aggregating $19.5 million.

As of March 31, 2026, Mercantile Bank’s total regulatory capital equaled $779 million, or $215 million in excess of the 10.0% minimum that is among the requirements to be categorized as “well capitalized.” Eastern Michigan Bank’s total risk-based capital ratio was 21.6% as of March 31, 2026, compared to 20.2% as of December 31, 2025.

Eastern Michigan Bank’s total regulatory capital increased $2.6 million during the first three months of 2026, partially reflecting net income totaling $2.0 million and a $0.9 million reduction in the ineligible core deposit intangible balance due to amortization during the first quarter.

As of March 31, 2026, Eastern Michigan Bank’s total regulatory capital equaled $61.5 million, or $33.0 million in excess of the 10.0% minimum that is among the requirements to be categorized as “well capitalized.”

Our and our banks’ capital ratios as of March 31, 2026, and December 31, 2025, are disclosed in Note 14 of the Notes to Consolidated Financial Statements.

MERCANTILE BANK CORPORATION

Results of Operations

We recorded net income of $23.8 million, or $1.46 per basic and diluted share, for the third quarter of 2025, compared with net income of $19.6 million, or $1.22 per basic and diluted share, for the third quarter of 2024.

We recorded net income of $65.9 million, or $4.06 per basic and diluted share, for the first nine months of 2025, compared with net income of $60.0 million, or $3.72 per basic and diluted share, for the first nine months of 2024.

Diluted earnings per share increased $0.24, or 19.7%, during the third quarter of 2025, and $0.34, or 9.1%, during the first nine months of 2025, compared with the respective prior-year periods.

The increases in net income during the 2025 periods compared to the respective 2024 periods primarily reflected growth in net interest income and lower levels of federal income tax expense and provisions for credit losses, which more than offset increased noninterest expense.

Higher levels of noninterest income, mainly reflecting growth in treasury management fees and payroll services fees during both 2025 periods and an increase in mortgage banking income during the first nine months of 2025, also contributed to the increases in net income.

We recorded net income of $22.7 million, or $1.32 per basic and diluted share, for the first quarter of 2026, compared with net income of $19.5 million, or $1.21 per basic and diluted share, for the first quarter of 2025.

Excluding after-tax one-time costs associated with the year-end 2025 acquisition of Eastern Michigan Financial Corporation and previously announced core and digital banking system conversion (a non-GAAP measurement), net income improved to $25.2 million, or $1.46 per diluted share, for the first quarter of 2026.

Diluted earnings per share increased $0.25, or approximately 21%, in the first quarter of 2026 compared to the first quarter of 2025 using this non-GAAP measure.

The first quarter of 2026 represented the initial period of financial performance that included Eastern Michigan Bank’s operating results.

The increase in net income during the first three months of 2026 compared to the respective prior-year period reflected growth in net interest income and noninterest income and a lower provision for credit losses, which more than offset a higher level of noninterest expense.

Net interest income increased as earning asset expansion and a decrease in the cost of funds outweighed a lower yield on earning assets and growth in interest-bearing liabilities.

The decreases in federal income tax expense primarily resulted from the recognition of tax benefits stemming from the acquisition of transferable energy tax credits during the second quarter and third quarter of 2025;

net benefits from investments in tax credit structures also positively impacted federal income tax expense during the current-year third quarter.

The provisions for credit losses recorded during the 2025 periods mainly reflected a net increase in specific allocations driven by a commercial construction loan that was placed on nonaccrual during the second quarter and a net increase in qualitative factor allocations reflecting changes in the composition of the loan portfolio.

The net impact of changes to the economic forecast also contributed to the provision expense recorded during the first nine months of 2025.

Noninterest expense increased during the 2025 periods primarily due to higher levels of salary and benefit and data processing costs and allocations to the reserve for unfunded loan commitments.

Acquisition costs related to the previously announced partnership with Eastern Michigan Bank Corporation also contributed to the increases in noninterest expense during the 2025 periods.

Interest income during the third quarter of 2025 was $85.6 million, an increase of $2.2 million, or 2.7%, from the $83.4 million earned during the third quarter of 2024.

The increase in noninterest income mainly reflected higher levels of treasury management fees, interest rate swap income, and mortgage banking income.

The negative provision for credit losses recorded during the first quarter of 2026 primarily reflected improvements to the economic forecast, changes in loan mix, decreases to the residential mortgage loan portfolio, and a decline in specific allocations.

Excluding the previously mentioned one-time core and digital banking system conversion and acquisition costs, the increase in noninterest expense during the first three months of 2026 mainly reflected higher levels of salary and benefit and data processing costs and allocations to the reserve for unfunded loan commitments.

Interest income during the first quarter of 2026 was $85.4 million, an increase of $5.1 million, or 6.3%, from the $80.3 million earned during the first quarter of 2025.

The increase resulted from growth in average earning assets, which more than offset a lower yield on average earning assets.

Average earning assets equaled $5.92 billion during the third quarter of 2025, up $469 million, or 8.6%, from the level of $5.45 billion during the prior-year third quarter; average loans were up $201 million, average securities increased $163 million, and average interest-earning deposits grew $105 million.

The yield on average earning assets was 5.75% during the current-year third quarter, a decrease from 6.08% during the respective 2024 period.

The yield on loans was 6.38% during the third quarter of 2025, down from 6.69% during the third quarter of 2024 primarily due to lower interest rates on variable-rate commercial loans resulting from the FOMC lowering the targeted federal funds rate.

The FOMC decreased the targeted federal funds rate by 50 basis points in September of 2024 and 25 basis points in each of November and December of 2024, during which time average variable-rate commercial loans represented approximately 73% of average total commercial loans.

A further 25 basis point reduction in the targeted federal funds, which was approved by the FOMC in September of 2025, also contributed to the reduced loan yield.

Signifying the success of a strategic initiative to lower the loan-to-deposit ratio and increase on-balance sheet liquidity, higher-yielding loans represented a decreased percentage of earning assets and lower-yielding securities accounted for an increased percentage of earning assets in the third quarter of 2025 compared to the third quarter of 2024.

A lower yield on interest-earning deposits, reflecting the decreased interest rate environment, also contributed to the reduced yield on average earning assets.

The yield on securities equaled 3.04% during the third quarter of 2025, up from 2.43% during the prior-year third quarter.

Interest income during the first nine months of 2025 was $248 million, an increase of $8.9 million, or 3.7%, from the $239 million earned during the first nine months of 2024.

The increase resulted from a higher level of average earning assets, which more than offset a lower yield on average earning assets.

Average earning assets equaled $5.77 billion during the first nine months of 2025, up $520 million, or 9.9%, from the level of $5.25 billion during the first nine months of 2024; average loans increased $276 million, average securities grew $166 million, and average interest-earning deposits were up $77.7 million.

The yield on average earning assets was 5.76% during the first nine months of 2025, a decline from 6.06% during the respective 2024 period.

The decreased yield mainly resulted from a lower yield on loans and a change in earning asset mix, which more than offset an improved yield on securities reflecting the reinvestment of relatively low-yielding bonds and portfolio expansion activities.

The yield on loans was 6.33% during the first nine months of 2025, down from 6.66% during the first nine months of 2024 largely due to reduced interest rates on variable-rate commercial loans stemming from the aforementioned FOMC interest rate cuts.

Higher-yielding loans accounted for a decreased percentage of earning assets and lower-yielding securities and interest-earning deposits represented increased percentages of earning assets in the first nine months of 2025 compared to the first nine months of 2024.

A decreased yield on interest-earning deposits, reflecting the lower interest rate environment, also contributed to the reduced yield on average earning assets.

The yield on securities equaled 2.97% during the first nine months of 2025, up from 2.31% during the respective 2024 period.

MERCANTILE BANK CORPORATION

Interest expense during the third quarter of 2025 was $33.6 million, a decrease of $1.5 million, or 4.2%, from the $35.1 million expensed during the third quarter of 2024.

Average earning assets equaled $6.42 billion during the first three months of 2026, up $719 million, or 12.6%, from the level of $5.70 billion during the respective 2025 period;

average loans were up $199 million, average securities increased $357 million, and average other interest-earning assets grew $163 million.

The yield on average earning assets was 5.42% during the first three months of 2026, a decrease from 5.73% during the first three months of 2025.

The lower yield mainly stemmed from a reduced yield on loans and a change in earning asset mix, which more than offset an improved yield on securities resulting from the reinvestment of relatively low-yielding bonds and portfolio expansion activities, along with the positive impact resulting from the addition of Eastern Michigan Bank’s securities portfolio.

The yield on loans was 6.04% during the first quarter of 2026, down from 6.28% during the first quarter of 2025, primarily due to reduced interest rates on variable-rate commercial loans resulting from the Federal Open Market Committee (“FOMC”) lowering the targeted federal funds rate.

The FOMC decreased the targeted federal funds rate by 25 basis points in each of September, October, and December of 2025, during which time average variable-rate commercial loans represented approximately 77% of average total commercial loans.

Denoting the success of a strategic initiative to lower the loan-to-deposit ratio and increase on-balance sheet liquidity and reflecting the impact of Eastern Michigan Bank’s liquid balance sheet, higher-yielding loans represented a decreased percentage of earning assets and lower-yielding securities accounted for an increased percentage of earning assets in the first quarter of 2026 compared to the first quarter of 2025.

The yield on securities equaled 3.27% during the first quarter of 2026, up from 2.73% during the prior-year first quarter.

The yield on other interest-earning assets, largely consisting of funds on deposit with the Federal Reserve Bank of Chicago, declined from 4.80% during the first three months of 2025 to 4.00% during the respective 2026 period, reflecting the decreased interest rate environment.

Interest expense during the first quarter of 2026 was $29.5 million, a decrease of $2.3 million, or 7.1%, from the $31.8 million expensed during the first quarter of 2025.

The lower level of interest expense resulted from a decrease in the weighted average cost of average interest-bearing liabilities, which more than offset growth in these funds.

The average weighted cost of interest-bearing liabilities declined from 3.53% during the third quarter of 2024 to 3.06% during the third quarter of 2025 mainly due to lower rates paid on money market accounts and time deposits, reflecting the decreased interest rate environment that began in September of 2024 in conjunction with the FOMC’s lowering of the targeted federal funds rate.

Average interest-bearing liabilities totaled $4.36 billion during the third quarter of 2025, compared to $3.94 billion during the prior-year third quarter, representing an increase of $418 million, or 10.6%.

Interest expense during the first nine months of 2025 was $97.9 million, an increase of $1.6 million, or 1.7%, from the $96.3 million expensed during the first nine months of 2024.

The increased interest expense reflected growth in average interest-bearing liabilities, which more than offset a reduction in the weighted average cost of these funds.

Average interest-bearing liabilities totaled $4.25 billion during the first nine months of 2025, compared to $3.77 billion during the respective 2024 period, representing an increase of $483 million, or 12.8%.

The average weighted cost of interest-bearing liabilities decreased from 3.40% during the first nine months of 2024 to 3.08% during the first nine months of 2025 mainly due to lower rates paid on money market accounts and time deposits, reflecting the decreased interest rate environment starting in September of 2024 and coinciding with the FOMC’s lowering of the targeted federal funds rate.

A change in funding mix, primarily consisting of decreases in average noninterest-bearing checking accounts and lower-cost non-time deposits and increases in average higher-cost money market accounts and time deposits as a percentage of total funding sources, negatively impacted the weighted average cost of interest-bearing liabilities during the first nine months of 2025.

The increases in money market accounts and time deposits reflected new deposit relationships, growth in existing deposit relationships, and deposit migration.

Net interest income during the third quarter of 2025 was $52.0 million, an increase of $3.7 million, or 7.7%, from the $48.3 million earned during the respective 2024 period.

The increase reflected growth in earning assets, which more than offset a slightly lower net interest margin.

The net interest margin was 3.50% in the current-year third quarter, down from 3.52% in the third quarter of 2024 due to a decreased yield on average earning assets, which more than offset a decline in the cost of funds.

The lower yield on average earning assets mainly resulted from a decreased yield on commercial loans, largely reflecting the impact of the previously mentioned FOMC rate cuts.

The cost of funds equaled 2.25% in the third quarter of 2025, down from 2.56% in the prior-year third quarter primarily due to lower costs of money market accounts and time deposits, largely reflecting the decreasing interest rate environment over the last four months of 2024.

Net interest income during the first nine months of 2025 was $150 million, an increase of $7.3 million, or 5.1%, from the $143 million earned during the respective 2024 period.

The increase reflected earning asset expansion, which more than offset a decreased net interest margin.

The net interest margin was 3.49% in the first nine months of 2025, down from 3.62% in the first nine months of 2024 due to a lower yield on earning assets, which outweighed a decreased cost of funds.

The reduced yield on average earning assets primarily reflected a decreased yield on commercial loans, in large part stemming from the aforementioned FOMC rate cuts.

The cost of funds equaled 2.27% in the first nine months of 2025, down from 2.44% in the respective 2024 period mainly due to lower rates paid on money market accounts and time deposits, in large part reflecting the decreasing interest rate environment during the last four months of 2024.

The following tables set forth certain information relating to our consolidated average interest-earning assets and interest-bearing liabilities and reflect the average yield on assets and average cost of liabilities for the third quarters and first nine months of 2025 and 2024.

The average weighted cost of interest-bearing liabilities declined from 3.08% during the first quarter of 2025 to 2.54% during the first quarter of 2026 mainly due to lower rates paid on money market accounts and time deposits, reflecting the decreased interest rate environment.

An increase in low-cost deposit products as a percentage of total funding sources, primarily stemming from the onboarding of Eastern Michigan Bank’s deposit base, also contributed to the reduced weighted average cost of average interest-bearing liabilities.

During the first three months of 2026, average interest-bearing liabilities totaled $4.71 billion, up $529 million, or 12.6%, from $4.18 billion during the respective 2025 period.

Net interest income during the first quarter of 2026 was $55.9 million, an increase of $7.4 million, or 15.1%, from the $48.5 million earned during the first quarter of 2025.

The increase reflected growth in earning assets, along with a higher net interest margin.

The net interest margin was 3.55% in the current-year first quarter, up from 3.47% in the first quarter of 2025 due to a decreased cost of funds, which more than offset a lower yield on average earning assets.

The cost of funds equaled 1.87% in the first quarter of 2026, down from 2.26% in the prior-year first quarter mainly due to lower costs of money market accounts and time deposits, largely reflecting the decreased interest rate environment, and a higher level of low-cost deposit products primarily stemming from the addition of Eastern Michigan Bank’s deposit base.

The following table sets forth certain information relating to our consolidated average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and average cost of liabilities for the first quarters of 2026 and 2025.

Such yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the period presented.

Tax-exempt securities interest income and yield for the third quarters and first nine months of 2025 and 2024 have been computed on a tax equivalent basis using a marginal tax rate of 21.0%.

Securities interest income was increased by $255,000 and $60,000 in the third quarters of 2025 and 2024, respectively, and $765,000 and $180,000 in the first nine months of 2025 and 2024, respectively, for this non-GAAP, but industry standard, adjustment.

These adjustments equated to increases in our net interest margin of approximately two basis points for each of the 2025 periods and less than one basis point for each of the 2024 periods.

MERCANTILE BANK CORPORATION

Quarters ended September 30,

(dollars in thousands)

Investment securities

Interest-earning deposits

Total interest - earning assets

Allowance for credit losses

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing deposits

Short-term borrowings

Federal Home Loan Bank advances

Other borrowings

Total interest-bearing liabilities

Noninterest-bearing deposits

Other liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest income

Net interest rate spread

Net interest spread on average assets

Net interest margin on earning assets

Tax-exempt securities interest income and yield for the first three months of 2026 and 2025 have been computed on a tax equivalent basis using a marginal tax rate of 21.0%.

Securities interest income was increased by $300,000 and $255,000 in the first quarters of 2026 and 2025, respectively, for this non-GAAP, but industry standard, adjustment.

These adjustments equated to increases in our net interest margin of approximately two basis points for the first quarters of 2026 and 2025.

MERCANTILE BANK CORPORATION

Nine months ended September 30,

Quarters ended March 31,

(dollars in thousands)

Investment securities

Interest-earning deposits

Other interest-earning assets

Total interest - earning assets

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MERCANTILE BANK CORPORATION

Provisions for credit losses of $0.2 million and $1.1 million were recorded during the third quarters of 2025 and 2024, respectively, and $3.9 million and $5.9 million during the first nine months of 2025 and 2024, respectively.

The provision expense recorded during the current-year third quarter mainly reflected a $2.9 million net increase in specific allocations, largely reflecting a $3.1 million increase in the specific allocation for a commercial construction loan relationship that was placed on nonaccrual during the second quarter of 2025, and a $0.9 million net increase in qualitative factor allocations resulting from changes in the composition of the loan portfolio.

The impacts of these factors were partially offset by $2.3 million and $0.9 million reductions in the reserve related to faster residential mortgage and consumer loan prepayment speeds and the associated shortened average lives of the portfolios and a net decline in the loan portfolio, respectively.

The provision expense recorded during the first nine months of 2025 primarily reflected a $4.6 million net increase in specific allocations driven by $5.5 million in total allocations for the aforementioned commercial construction loan, a $1.9 million reserve increase related to changes to the economic forecast, and a $1.7 million net increase in qualitative factors stemming from changes in the makeup of the loan portfolio.

The impacts of these factors were partially offset by $2.3 million and $1.2 million reductions in the reserve related to faster residential mortgage and consumer loan prepayment speeds and the associated reduced average lives of the portfolios and changes in baseline loss rates, respectively.

The provision expense recorded during the third quarter of 2024 mainly reflected an increase in environmental factor allocations and allocations necessitated by net loan growth, which were partially offset by reductions in the calculated allowance due primarily from the payoffs of two larger problem commercial lending relationships previously included in the collective evaluation.

The provision expense recorded during the first nine months of 2024 primarily reflected specific allocations for two different nonperforming nonreal-estate-related commercial loan relationships and allocations necessitated by net loan growth, which were partly offset by the previously mentioned decrease in the calculated allowance.

The recording of net loan recoveries and sustained strength in loan quality metrics during the 2025 and 2024 periods positively impacted necessary provision levels.

Noninterest income totaled $10.4 million during the third quarter of 2025, up $0.7 million, or 7.5%, from $9.7 million during the respective 2024 period.

The increase mainly stemmed from growth in treasury management fees, payroll services fees, and earnings on bank owned life insurance, which more than offset a reduction in mortgage banking income.

The increases in treasury management and payroll services fees primarily reflected clients’ expanded use of products and services and new customer acquisition, while the lower level of mortgage banking income mainly resulted from a change in the quarter-end fair value of commitments to originate salable residential mortgage loans.

Noninterest income during the third quarter of 2025 included bank owned life insurance death benefit claims totaling $0.3 million.

Noninterest income totaled $30.6 million during the first nine months of 2025, compared to $30.2 million during the first nine months of 2024.

Bank owned life insurance death benefit claims totaling $0.3 million and $0.7 million were recorded during the first nine months of 2025 and 2024, respectively.

Noninterest income during the first nine months of 2024 also included gains on the sales of other real estate owned totaling $0.4 million.

Excluding these transactions, noninterest income increased $1.2 million, or 4.0%, in the first nine months of 2025 compared to the respective 2024 period.

The growth primarily reflected higher levels of treasury management fees and payroll services fees, largely resulting from customers’ increased use of products and services and successful client acquisition efforts, and mortgage banking income, mainly reflecting increases in the percentage of loans originated with the intent to sell and total loan production, which more than offset decreases in revenue generated from investments in private equity funds and interest rate swap income.

The percentage of mortgage loans originated with the intent to sell increased from approximately 77% during the first nine months of 2024 to approximately 80% during the first nine months of 2025, and total mortgage loan originations were up approximately 4% during the respective periods.

Interest rate swap income can vary greatly from period to period due to the timing of closing transactions.

Noninterest expense totaled $34.8 million during the third quarter of 2025, up from $32.3 million during the prior-year third quarter.

Noninterest expense totaled $99.2 million during the first nine months of 2025, compared to $92.0 million during the first nine months of 2024.

The increases primarily resulted from higher salary and benefit costs, mainly reflecting annual merit pay increases, market adjustments, and lower residential mortgage loan deferred salary costs;

a larger bonus accrual and higher levels of payroll taxes and retirement costs also contributed to the increase in salary and benefit expenses during the first nine months of 2025.

Increased data processing costs, primarily reflecting increased software support costs, and allocations to the reserve for unfunded loan commitments, largely stemming from an increase in commercial loan commitments, also contributed to the rises in noninterest expense during the 2025 periods.

Lower depreciation expense, mainly reflecting facility expansion and leasehold improvement projects becoming fully depreciated during 2024, positively impacted noninterest expense during both 2025 periods.

Contributions to The Mercantile Bank Foundation totaled $0.3 million during the third quarter of 2025 and $0.3 million and $0.7 million during the first nine months of 2025 and 2024, respectively, while acquisition costs related to the planned partnership with Eastern Michigan Financial Corporation totaled $0.6 million during the third quarter and first nine months of 2025.

During the third quarter of 2025, we recorded income before federal income tax of $27.5 million and federal income tax expense of $3.7 million.

During the third quarter of 2024, we recorded income before federal income tax of $24.5 million and federal income tax expense of $4.9 million.

During the first nine months of 2025, we recorded income before federal income tax of $77.4 million and federal income tax expense of $11.5 million.

During the first nine months of 2024, we recorded income before federal income tax of $75.1 million and federal income tax expense of $15.1 million.

The decreases in federal income tax expense during the 2025 periods primarily reflected the acquisition of transferable energy tax credits during the second and third quarters of 2025, which provided for aggregate tax benefits of $1.0 million and $2.6 million during the current-year third quarter and first nine months of 2025, respectively.

Net benefits from investments in tax credit structures provided for aggregate tax benefits of $0.7 million and $1.2 million during the third quarter and first nine months of 2025, respectively.

The recording of tax benefits positively impacted our effective tax rate, which equaled 13.4% and 14.9% in the third quarter and first nine months of 2025, respectively, compared to 20.1% in the respective 2024 periods.

The previously mentioned bank owned life insurance death benefit claims, substantially all of which were nontaxable, positively impacted the effective tax rates in the third quarter and first nine months of 2025 and first nine months of 2024.

We recorded a negative provision for credit losses of $1.8 million during the first quarter of 2026, compared to a positive provision for credit losses of $2.1 million during the first quarter of 2025.

The negative provision expense recorded during the current-year first quarter mainly reflected improvements to the economic forecast, changes in loan mix, decreases to the residential mortgage loan portfolio, and a decline in specific allocations, which reduced the calculated allowance for credit losses by $0.6 million, $0.4 million, $0.2 million, and $0.2 million, respectively.

Noninterest income totaled $11.7 million during the first quarter of 2026, up $3.0 million, or 34.3%, from $8.7 million during the prior-year first quarter.

The increase mainly reflected higher levels of treasury management fees, interest rate swap income, mortgage banking income, bank owned life insurance income, and payroll services fees.

The increases in treasury management and payroll services fees primarily resulted from new commercial client acquisitions and effective marketing endeavors leading to customers’ amplified use of products and services, as well as a modified fee schedule.

The growth in interest rate swap income mainly reflected a higher volume of new swap transactions, while the increase in mortgage banking income largely resulted from higher production and an increased percentage of loans originated with the intent to sell.

Noninterest income during the first three months of 2026 included $0.4 million in interest from the Internal Revenue Service on federal income tax payments made during 2024 that were subsequently refunded due to offsetting purchased energy tax credits.

Noninterest expense totaled $42.1 million during the first quarter of 2026, compared to $31.1 million during the first quarter of 2025.

The increase in noninterest expense mainly resulted from higher salary and benefit costs, largely reflecting annual merit pay increases, market adjustments, a larger bonus accrual, increased health insurance costs, higher payroll taxes, larger residential mortgage lender commissions and incentives, lower residential mortgage loan deferred salary costs, and increased stock-based compensation costs.

The remaining increase in noninterest expense during the first three months of 2026 primarily reflected cost inflation and the increased cost of a larger balance sheet and branch network.

Eastern Michigan Bank’s noninterest expense totaled $4.0 million during the first quarter of 2026, including salary and benefit costs of $1.7 million, core deposit intangible asset amortization of $0.9 million, and data processing costs of $0.4 million.

During the first quarter of 2026, we recorded income before federal income tax of $27.3 million and federal income tax expense of $4.6 million.

During the first quarter of 2025, we recorded income before federal income tax of $24.0 million and federal income tax expense of $4.5 million.

The $0.1 million increase in federal income tax expense primarily resulted from a higher level of income before federal income tax.

The acquisition of transferable energy tax credits and the net benefits from low-income housing and historic tax credit investments provided for aggregate tax benefits of $0.8 million and $0.3 million during the first three months of 2026 and 2025, respectively.

The recording of the tax benefits positively impacted our effective tax rate, which equaled 16.9% during the first quarter of 2026, down from 18.8% during the prior-year first quarter.

MERCANTILE BANK CORPORATION

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What changed 10-Q

Item 1. Financial Statements